Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021March 31, 2022
OR
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number:
001-39647001-40856
 
 
KORE Group Holdings, Inc.
(Exact Name of Registrant as Specified in its Charter)
 
 
Delaware
 
86-3078783
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
  
3700 Mansell Road
,3 Ravinia Drive NE, Suite 300500
Alpharetta,Atlanta, Georgia
 
3002230346
(Address of principal executive offices)
 
(Zip Code)
877-710-5673
(Registrant’s telephone number, including area code)
King Pubco, Inc.
875 Third Avenue
New York, NY 10022
(Former name, former address and former fiscal year, if changed since last report)
 
 
Securities registered pursuant to Section 12(b) of the Act: None.
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Common stock, $0.0001 par value per share
KORE
The New York Stock Exchange
Warrants to purchase common stock
KORE WS
The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☐☒    No  ☒☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation
 S-T (§
S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer ☐  Accelerated filer ☐
    
Non-accelerated
filer		 ☒  Smaller reporting company ☐
    
Emerging growth company ☒     
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Common stock, $0.0001 par value per share
KORE
The New York Stock Exchange
Warrants to purchase common stock
KORE WS
The New York Stock Exchange

Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  ☐☒
 
As of
November 16, 2021
, May 11, 2022, there were
71,989,432
76,239,989 shares of the registrant’s Class A common stock, par value $0.0001 per share, issued and outstanding.
 
 
 
Table of Contents
TABLE OF CONTENTS
 
     
Page
No.
 
PART I —- FINANCIAL INFORMATION
  
2
Item 1.
 
Financial Statements (Unaudited)
  
2
Item 2.
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  
28
23
Item 3.
 
Quantitative and Qualitative Disclosures About Market Risk
  
48
35
Item 4.
 
Controls and Procedures
  
48
35
PART II –- OTHER INFORMATION
  
49
38
Item 1.
 
Legal Proceedings
  
49
38
Item 1A. Risk Factors
  
49
38
Item 2.
 
Unregistered Sales of Equity Securities and Use of Proceeds
50
Item 3.
  Defaults Upon Senior Securities
38
50
Item 4.
Mine Safety Disclosures50
Item 5.
 
Other Information
  
50
38
Item 6.
 
Exhibits
  
51
38
i
Table of Contents
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form
10-Q
contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report on Form
10-Q
may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form
10-Q
include, but are not limited to statements regarding our future results of operations and financial position, industry and business trends, equity compensation, business strategy, plans, market growth and our objectives for future operations.
The forward-looking statements in this Quarterly Report on Form
10-Q
are only current expectations and predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statement. The forward-looking statements in this Quarterly Report on Form
10-Q
are based upon information available to us as of the date of this Quarterly Report on Form
10-Q,
and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this Quarterly Report on Form
10-Q
and the documents that we reference in this Quarterly Report on Form
10-Q
and have filed as exhibits to this Quarterly Report on Form
10-Q
with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form
10-Q.
Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form
10-Q,
whether as a result of any new information, future events or otherwise.
1
Table of Contents
PART I
--
— FINANCIAL INFORMATION
 
Item 1.
Financial Statements (Unaudited)
KORE Group Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands USD, except share and per share amounts)
         
   
March 31
2022
  
December 31
2021
 
   
(Unaudited)
    
Assets
         
Current assets
   ��     
Cash and cash equivalents  $31,914  $85,976 
Accounts receivable, net of allowances for credits and doubtful accounts of $2,417 and $1,800, at March 31, 2022 and December 31, 2021, respectively   57,073   51,304 
Inventories, net   12,069   15,470 
Income taxes receivable   1,239   954 
Prepaid expenses and other receivables   7,661   7,448 
          
Total current assets
  
 
109,956
 
 
 
161,152
 
Non-current
assets
         
Restricted cash   370   367 
Property and equipment, net   12,167   12,240 
Intangibles assets, net   222,759   203,474 
Goodwill   426,700   381,962 
Operating lease
right-of-use
assets
   9,050   0   
Other long-term assets   401   407 
          
Total assets
  
$
781,403
 
 
$
759,602
 
          
Liabilities and stockholders’ equity
         
Current liabilities
         
Accounts payable  $19,901  $16,004 
Accrued liabilities   11,424   21,502 
Current portion of operating lease liabilities   2,027   0   
Income taxes payable   959   467 
Deferred revenue   7,020   6,889 
Current portion of long-term debt and other borrowings, net   3,206   3,326 
          
Total current liabilities
  
 
44,537
 
 
 
48,188
 
Non-current
liabilities
         
Deferred tax liabilities   36,443   36,722 
Warrant liability   259   286 
Non-current
portion of operating lease liabilities
   7,430   0   
Long-term debt and other borrowings, net   414,026   399,115 
Other long-term liabilities   3,624   3,148 
          
Total liabilities
  
$
506,319
 
 
$
487,459
 
          
Commitments and contingencies         
Stockholders’ equity
         
Common stock, voting; par value $0.0001 per share; 315,000,000 shares authorized, 76,239,989 and 72,027,743 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively  $8  $7 
Additional
paid-in
capital
   427,378   413,646 
Accumulated other comprehensive loss   (3,515)   (3,331) 
Accumulated deficit   (148,787)   (138,179) 
          
Total stockholders’ equity
   275,084  
 
272,143
 
          
Total liabilities and stockholders’ equity
  
$
781,403
 
 
$
759,602
 
          
See accompanying notes to the unaudited condensed consolidated financial statements
         
   
September 30, 2021
(unaudited)
   
December 31,
2020
 
Assets
          
Current assets
          
Cash and cash equivalents  $72,689   $10,321 
Accounts receivable, net of allowances for credits and doubtful accounts of $1,601 and $2,804, at September 30, 2021, and December 31, 2020, respectively   52,638    40,661 
Inventories, net   12,147    5,842 
Prepaid expenses and other receivables   14,540    5,429 
           
Total current assets
  
 
152,014
 
  
 
62,253
 
Non-current
assets
          
Restricted cash   367    372 
Property and equipment, net   12,630    13,709 
Intangible assets, net   212,633    240,203 
Goodwill   382,190    382,749 
Deferred tax assets   114    122 
Other long-term assets   458    611 
           
Total assets
  
$
760,406
 
  
$
 700,019
 
           
Liabilities, temporary equity and stockholders’ equity
          
Current liabilities
          
Accounts payable  $20,522   $22,978 
Accrued liabilities   26,362    17,209 
Income taxes payable   288    244 
Current portion of capital lease obligations   528    856 
Deferred revenue   6,797    7,772 
Current portion of long-term debt   3,153    3,161 
           
Total current liabilities
  
 
57,650
 
  
 
52,220
 
Long-term liabilities
          
Deferred tax liabilities   34,580    42,840 
Due to related parties   1,122    1,615 
Warrant liability   273    15,944 
Capital lease obligations   304    508 
Long-term debt   378,356    298,404 
Other long-term liabilities   4,154    4,377 
           
Total liabilities
  
$
476,439
 
  
$
415,908
 
           
Commitments and contingencies (note 7)
 
2
Table of Contents
KORE Group Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets - Continued
(In thousands USD, except share and per share amounts)
         
   
September 30,
2021
(unaudited)
  
December 31,
2020
 
Temporary equity
         
Series A Preferred Stock; par value $1,000 per share; NaN authorized, issued and outstanding at September 30, 2021; 7,765,229 shares authorized, and 7,756,158 shares issued and outstanding at December 31, 2020  $—    $77,562 
Series
A-1
Preferred Stock; par value $1,000 per share; NaN authorized, issued and outstanding at September 30, 2021; 10,480,538 shares authorized, 7,862,107 shares issued and outstanding at December 31, 2020
   —     78,621 
Series B Preferred Stock; par value $1,000 per share; NaN authorized, issued and outstanding at September 30, 2021; 9,090,975 shares authorized, issued and outstanding at December 31, 2020   —     90,910 
Series C Convertible Preferred Stock; par value $1,000 per share; NaN authorized, issued and outstanding at September 30, 2021; 6,872,894 shares authorized, 2,566,186 shares issued and outstanding at December 31, 2020   —     16,802 
          
Total temporary equity
   —    
 
263,895
 
          
Stockholders’ equity (deficit)
         
Common stock, voting; par value $0.0001 per share, 315,000,000 shares authorized, 71,810,419 shares issued and outstanding at September 30, 2021; par value $0.01 per share, 55,659,643 shares authorized, 30,281,520 shares issued and outstanding at December 31, 2020   7   3 
Additional
paid-in
capital
   413,316   135,616 
Accumulated other comprehensive loss   (3,156)   (1,677) 
Accumulated deficit   (126,200)  (113,726) 
          
Total stockholders’ equity
  
 
283,967
 
 
 
20,216
 
          
Total liabilities, temporary equity and stockholders’ equity
  
$
760,406
 
 
$
700,019
 
          
See accompanying notes to unaudited condensed consolidated financial statements.
3
Table of Contents
KORE Group Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands USD, except share and per share amounts) (unaudited)
 
    
  
For the three months ended
September 30,
 
For the nine months ended
September 30,
   
For the three months ended

March 31,

 
  
2021
 
2020
 
2021
 
2020
   
2022
 
2021
 
Revenue
        
Services  $48,428  $43,436  $139,866  $127,113   $47,506  $45,062 
Products   19,450   11,821   44,053   29,184    21,435   10,235 
                    
Total revenue
  
 
67,878
 
 
 
55,257
 
 
 
183,919
 
 
 
156,297
 
  
 
68,941
 
 
 
55,297
 
Cost of revenue
        
Cost of services   17,379   15,675   51,417   47,594    17,529   16,211 
Cost of products   17,585   9,853   37,258   22,921    17,443   8,161 
                    
Total cost of revenue (exclusive of depreciation and amortization shown separately below)
  
 
34,964
 
 
 
25,528
 
 
 
88,675
 
 
 
70,515
 
  
 
34,972
 
 
 
24,372
 
                    
Operating expenses
        
Selling, general and administrative   26,001   17,792   66,525   49,907    27,628   17,521 
Depreciation and amortization   12,440   13,176   37,947   38,884    13,196   13,114 
                    
Total operating expenses
  
 
38,441
 
 
 
30,968
 
 
 
104,472
 
 
 
88,791
 
  
 
40,824
 
 
 
30,635
 
                    
Operating loss
  
 
(5,527
) 
 
(1,239
) 
 
 
(9,228
) 
 
(3,009
) 
Operating income (loss)
  
 
(6,855
) 
 
 
290
 
Interest expense, including amortization of deferred financing costs, net   5,589   5,276   16,155   18,359    6,624   5,059 
Change in fair value of warrant liability   (2,898)   651   (5,281)  3,482    (27)   (2,424) 
                    
Loss before income taxes
  
 
(8,218
) 
 
(7,166
) 
 
 
(20,102
) 
 
(24,850
) 
  
 
(13,452
) 
 
 
(2,345
) 
Income tax provision (benefit)
     
Income tax expense (benefit)
   
Current   179   201   569   711    1,306   102 
Deferred   (3,889)  (1,719)   (8,197)  (6,087)    (3,851)   (1,366) 
                    
Total income tax benefit
  
 
(3,710
) 
 
(1,518
) 
 
 
(7,628
) 
 
(5,376
) 
  
 
(2,545
) 
 
 
(1,264
) 
                    
Net loss
  
$
(4,508
) 
$
(5,648
) 
 
$
(12,474
)
 
 
$
(19,474
) 
             
Net loss attributable to the Company
  
$
(10,907
) 
 
$
(1,081
) 
            
Loss per share:
        
Basic  $(0.27) $(0.42)  $(1.03) $(1.32)   $(0.15)  $(0.27) 
Diluted   (0.27)  (0.42)   (1.03)  (1.32)   $(0.15)  $(0.27) 
Weighted average shares outstanding (in Number):
     
Weighted average number of shares outstanding:
   
Basic   30,732,921   30,281,520   30,433,641   30,285,684    74,040,261   31,647,131 
Diluted   30,732,921   30,281,520   30,433,641   30,285,684    74,040,261   31,647,131 
See accompanying notes to the unaudited condensed consolidated financial statements.statements
 
43
Table of Contents
KORE Group Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Loss
(In thousands USD) (unaudited)
 
    
  
For the three months ended
 
  
    For the three months    
ended September 30,
 
    For the nine months ended    
September 30,
   
March 31,
 
  
2021
 
2020
 
2021
 
2020
   
2022
 
2021
 
Net loss  $(4,508) $(5,648)  $(12,474) $(19,474)   
$
(10,907
) 
 
$
(1,081
) 
Other comprehensive income (loss):
   
Other comprehensive loss:
   
Foreign currency translation adjustment   (1,322)   1,387   (1,479)   (896)    (184)   (900) 
                    
Comprehensive loss
  
$
(5,830
) 
$
(4,261
) 
 
$
(13,953
) 
$
(20,370
) 
  
$
(11,091
) 
 
$
(1,981
) 
                    
See accompanying notes to the unaudited condensed consolidated financial statements.statements
 
54
Table of Contents
KORE Group Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Temporary Equity and Stockholders’ (Deficit) Equity
(In thousands, USD, or shares)except share amounts) (unaudited)
 
   
Series A Preferred

Stock
  
Series A-1 Preferred

Stock
  
Series B Preferred

Stock
  
Series C
Convertible
Preferred Stock
  
Total
Temporary
Equity
  
Common Stock
   
Additional paid-in

capital
  
Accumulated Other
Comprehensive Loss
  
Accumulated
Deficit
  
Total
Stockholders’
(Deficit)
Equity
 
                                                 
   
Temporary Equity
  
Stockholders’ Equity
 
   
Shares
  
Amount
  
Shares
  
Amount
  
Shares
  
Amount
  
Shares
  
Amount
  
Amount
  
Shares
   
Amount
   
Amount
  
Amount
  
Amount
  
Amount
 
Balance at December 31, 2020 (as previously reported)
   43  $77,562   60  $78,621   57  $90,910   17  $16,802  $263,895   218   $2   $135,617  $(1,677)  $(113,726)  $20,216 
                                                                
Conversion of stock   7,713   —     7,802   —     9,034   —     2,549   —     —     30,064    1    (1)   —     —     —   
                                                                
Balance at December 31, 2020, effect of reverse recapitalization
   7,756  $77,562   7,862  $78,621   9,091  $90,910   2,566  $16,802  $263,895   30,282   $3   $135,616  $(1,677)  $(113,726)  $20,216 
                                                                
Repurchase of stock   —                                                             
Accrued dividends payable   249   2,486   267   2,666   224   2,241   —     —     7,393   —      —      (7,393)   —     —     (7,393) 
Foreign currency translation adjustment   —     —     —     —     —     —     —     —     —     —      —      —     (900)   —     (900) 
Share-based compensation   —     —     —     —     —     —     —     —     —     —      —      315   —     —     315 
Net loss   —     —     —     —     —     —     —     —     —     —      —      —     —     (1,081)   (1,081) 
                                                                
Balance at March 31, 2021
   8,005  $80,048   8,129  $81,287   9,315  $93,151   2,566  $16,802  $271,288   30,282   $3   $128,538  $(2,577)  $(114,807)  $11,157 
                                                                
Derecognition of shares   —     —     —     —     —     —     (46)   (300)   (300)   —      —      —     —     —     —   
Accrued dividends payable   251   2,514   270   2,695   232   2,323   —     —     7,532   —      —      (7,532)   —     —     (7,532) 
Foreign currency translation adjustment   —     —     —     —     —     —     —     —     —     —      —      —     743   —     743 
Share-based compensation   —     —     —     —     —     —     —     —     —     —      —      315   —     —     315 
Net loss   —     —     —     —     —     —     —     —     —     —      —      —     —     (6,885)   (6,885) 
                                                                
Balance at June 30, 2021
   8,256  $82,562   8,399  $83,982   9,547  $95,474   2,520  $16,502  $278,520   30,282   $3   $121,321  $(1,834)  $(121,692)  $(2,202) 
                                                                
Redemption of stock   —     —     —     —     —     —     —     —     —     —      —      —     —     —     —   
Accrued dividends payable   266   2,656   288   2,880   236   2,361   —     —     7,897   —      —      (7,897)   —     —     (7,897) 
Foreign currency translation adjustment   —     —     —     —     —     —     —     —     —     —      —      —     (1,322)   —     (1,322) 
Share-based compensation   —     —     —     —     —     —     —     —     —     —      —      (3,519)  —     —     (3,519)
Distributions to
and conversions of preferred stock
   (8,522)   (85,218)   (8,687)   (86,862)   (9,783)   (97,835)   (2,520)   (16,502)   (286,417)   7,120    1    56,502   —     —     56,503 
CTAC shares recapitalized, net of equity issuance costs of $15,912   —     —     —     —     —   —   —   —   —   10,356    1    6,456   —     —     6,457 
Conversion of
 

KORE warrants
   —     —     —     —     —   —   —   —   —   1,366    —      10,663   —     —     10,663 
Private offering and merger financing, net of equity issuance costs of $7,718   —     —     —     —     —   —   —   —   —   22,686    2    217,280   —     —     217,282 
Equity portion of convertible debt, net of issuance cost
s of $224
 
 
  
—
 
 
   
—
 
 
   
—
 
 
   
—
 
 
   
—
   
—
   
—
   
—
   
—
   
—
 
 
   
—
 
 
   
 
12,510
   
—
 
 
   
—
   
 
12,510
 
Net loss   —     —     —     —     —     —     —     —     —     —      —      —     —     (4,508)  (4,508)
                                                                
Balance at September 30, 2021
   0    $0     0    $0     0    $0     0    $0    $0     71,810   $7   $413,316  $(3,156)  $(126,200) $283,967 
                                                                
                         
   
Common Stock
   
Additional
paid-in capital
  
Accumulated
Other
Comprehensive
Loss
  
Accumulated
Deficit
  
Total
Stockholders’
Equity
 
   
Shares
   
Amount
   
Amount
  
Amount
  
Amount
  
Amount
 
Balance at December 31, 2021
  
 
72,027,743
 
  
$
7
 
  
$
413,646
 
 
$
(3,331
) 
 
$
(138,179
) 
 
$
272,143
 
Opening balance sheet adjustment   —      —      (11,612)   —     299   (11,313) 
                            
Adjusted opening balance  
 
72,027,743
 
  
 
7
 
  
 
402,034
 
 
 
(3,331
) 
 
 
(137,880
) 
 
 
260,830
 
                            
Foreign currency translation adjustment   —      —      —     (184)   —     (184) 
Stock-based compensation   —      —      2,050   —     —     2,050 
Common stock issued pursuant to acquisition   4,212,246    1    23,294   —     —     23,295 
Net loss   —      —      —     —     (10,907)   (10,907) 
                            
Balance at March 31, 2022
  
 
76,239,989
 
  
$
8
 
  
$
427,378
 
 
$
(3,515
) 
 
$
(148,787
) 
 
$
275,084
 
                            
 
                                     
   
Series A
Preferred Stock
   
Series
A-1

Preferred Stock
   
Series B
Preferred Stock
   
Series C Convertible
Preferred Stock
   
Total
Temporary
Equity
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Amount
 
Balance at December 31, 2020 (as previously reported)
  
 
43
 
  
$
77,562
 
  
 
60
 
  
$
78,621
 
  
 
57
 
  
$
90,910
 
  
 
17
 
  
$
16,802
 
  
$
263,895
 
Conversion of stock   7,713    —      7,802    —      9,034    —      2,549    —      —   
                                              
Balance at December 31, 2020, effect of reverse recapitalization
  
 
7,756
 
  
$
77,562
 
  
 
7,862
 
  
$
78,621
 
  
 
9,091
 
  
$
90,910
 
  
 
2,566
 
  
$
16,802
 
  
$
263,895
 
                                              
Accrued dividends payable   249    2,486    267    2,666    224    2,241    —      —      7,393 
Foreign currency translation adjustment   —      —      —      —      —      —      —      —      —   
Stock-based compensation   —      —      —      —      —      —      —      —      —   
Net loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
                                              
Balance at March 31, 2021
  
 
8,005
 
  
$
80,048
 
  
 
8,129
 
  
$
81,287
 
  
 
9,315
 
  
$
93,151
 
  
 
2,566
 
  
$
16,802
 
  
$
271,288
 
                                              
 
                         
   
Common Stock
   
Additional
paid-in

capital
  
Accumulated
Other
Comprehensive
Loss
  
Accumulated
Deficit
  
Total
Stockholders’
Equity
 
   
Shares
   
Amount
   
Amount
  
Amount
  
Amount
  
Amount
 
Balance at December 31, 2020 (as previously reported)
  
 
218
 
  
$
2
 
  
$
135,617
 
 
$
(1,677
) 
 
$
(113,726
) 
 
$
20,216
 
Conversion of stock   30,064    1    (1)   —     —     —   
                            
Balance at December 31, 2020, effect of reverse recapitalization
  
 
30,282
 
  
$
3
 
  
$
135,616
 
 
$
(1,677
) 
 
$
(113,726
) 
 
$
20,216
 
                            
Accrued dividends payable   —      —      (7,393)   —     —     (7,393) 
Foreign currency translation adjustment   —      —      —     (900)   —     (900) 
Stock-based compensation   —      —      315   —     —     315 
Net loss   —      —      —     —     (1,081)   (1,081) 
                            
Balance at March 31, 2021
  
 
30,282
 
  
$
3
 
  
$
128,538
 
 
$
(2,577
) 
 
$
(114,807
) 
 
$
11,157
 
                            
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Table of Contents
KORE Group Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Temporary Equity and Stockholders’ (Deficit) Equity - Continued
(In thousands, USD or shares) (unaudited)
  
Series A Preferred Stock
  
Series A-1 Preferred Stock
  
Series B Preferred Stock
  
Series C
Convertible
Preferred Stock
  
Total
Temporary
Equity
  
Common Stock
  
Additional
paid-in

capital
  
Accumulated
Other
Comprehensive
Loss
  
Accumulated
Deficit
  
Total
Stockholders’
(Deficit)
Equity
 
                                              
  
Temporary Equity
  
Stockholders’ Equity
 
  
Shares
  
Amount
  
Shares
  
Amount
  
Shares
  
Amount
  
Shares
  
Amount
  
Amount
  
Shares
  
Amount
  
Amount
  
Amount
  
Amount
  
Amount
 
Balance at December 31, 2019 (as previously reported)
   43   $68,360    60   $69,495    57   $82,338    17   $16,802   $236,995    218  $2   $161,556  $(3,792)  $(78,526)  $79,240 
                                                                       
Conversion of Stock
   6,793    —      6,890    —      8,177    —      2,549    —      —      30,092   1    (1)   —     —     —   
                                                                       
Balanceat December 31, 2019, effect of reverse recapitalization
   6,836   $68,360    6,950    69,495    8,234    82,338    2,566    16,802    236,995    30,310   3    161,555   (3,792)   (78,526)   79,240 
                                                                       
Repurchase of common stock   —      —      —      —      —      —      —      —      —      (28)   —      (200)   —     —     (200) 
Accrued dividends payable   222    2,216    238    2,383    205    2,053    —      —      6,652    —     —      (6,652)   —     —     (6,652) 
Foreign currency translation adjustment   —      —      —      —      —      —      —      —      —      —     —      —     (3,113)   —     (3,113) 
Share-based compensation   —      —      —      —      —      —      —      —      —      —     —      216   —     —     216 
Net loss   —      —      —      —      —      —      —      —      —      —     —      —     —     (2,768)   (2,768) 
                                                                       
Balance at March 31, 2020
   7,058   $70,576    7,188   $71,878    8,439   $84,391    2,566   $16,802   $243,647    30,282  $3   $154,919  $(6,905)  $(81,294)  $66,723 
                                                                       
Accrued dividends payable   222    2,215    238    2,382    210    2,104    —      —      6,701    —     —      (6,701)   —     —     (6,701) 
Foreign currency translation adjustment   —      —      —      —      —      —      —      —      —      —     —      —     830   —     830 
Share-based compensation   —      —      —      —      —      —      —      —      —      —     —      315   —     —     315 
Net loss   —      —      —      —      —      —      —      —      —      —     —      —     —     (11,058)   (11,058) 
                                                                       
Balance at June 30, 2020
   7,280   $72,791    7,426   $74,260    8,649   $86,495    2,566   $16,802   $250,348    30,282  $3   $148,533  $(6,075)  $(92,352)  $50,109 
                                                                       
Accrued dividends payable   239    2,385    257    2,574    218    2,180    —      —      7,139    —     —      (7,139)   —     —     (7,139) 
Foreign currency translation adjustment   —      —      —      —      —      —      —      —      —      —     —      —     1,387   —     1,387 
Share-based compensation   —      —      —      —      —      —      —      —      —      —     —      315   —     —     315 
Net loss   —      —      —      —      —      —      —      —      —      —     —      —     —     (5,648)   (5,648) 
                                                                       
Balance at September 30, 2020
   7,519   $75,176    7,683   $76,834    8,867   $88,675    2,566   $16,802   $257,487    30,282  $3   $141,709  $(4,688)  $(98,000)  $39,024 
                                                                       
See accompanying notes to the unaudited condensed consolidated financial statements.statements
 
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Table of Contents
KORE Group Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands USD) (unaudited)
         
   
Nine months ended September 30,
 
   
2021
  
2020
 
Cash flows from operating activities
         
Net loss  $(12,474) $(19,474) 
Adjustments to reconcile net loss to net cash (used in) provided by operating activities         
Depreciation and amortization   37,947   38,884 
Amortization of deferred financing costs   1,569   1,584 
Deferred income taxes   (8,197)  (6,087) 
Non-cash
foreign currency loss (gain)
   (163)   (1,356) 
Share-based compensation   4,564   846 
Provision for doubtful accounts   117   888 
Change in fair value of warrant liability   (5,281)   3,482 
Change in operating assets and liabilities, net of operating assets and liabilities acquired:         
Accounts receivable   (12,792)  (3,572)
Inventories   (6,461)   (2,668)
Prepaid expenses and other receivables   (5,054)   (2,485) 
Accounts payable and accrued liabilities   (2,366)  8,119 
Deferred revenue   (911)   307 
Income taxes payable   63   225 
          
Cash (used in) provided by operating activities  
$
(9,439
) 
$
18,693
 
          
Cash flows used in investing activities
         
Additions to intangible assets   (6,626)   (8,224) 
Additions to property and equipment   (3,156)   (1,450) 
Acquisition of Integron LLC, net of
 
cash acquired
   —     366 
          
Net cash used in investing activities  
$
(9,782
) 
 
$
(9,308
) 
          
Cash flows from financing activities
         
Proceeds from revolving credit facility   25,000   21,700 
Repayments on revolving credit
facility
   (25,000)  (25,000) 
Repayment of long-term debt   (2,373)  (2,436) 
Proceeds from
convertible
debt
   82,351   —   
Proceeds from equity portion of convertible debt
,
n
e
t of issuance costs
 
  
 
12,510
   
—
 
 
 
Payment 
of
 deferred financing
costs, relating to convertible debt
  
(1,449
)		  
—
 
Repayment of related party note   (1,538)     
Repurchase of common stock   —     (200) 
Proceeds from CTAC and PIPE financing, net
of
 
issuance costs
   223,001   —   
Settlement of preferred shares   (229,915)  —   
Payment of capital lease obligations   (815)   (137) 
          
Cash provided by (used in) financing activities
  
$
81,772
 
 
$
(6,073
) 
          
Effect of Exchange Rate Change on Cash and Cash Equivalents
   (188)   (88) 
          
Change in Cash and Cash Equivalents and Restricted Cash
   62,363   3,224 
Cash and Cash Equivalents and Restricted Cash, beginning of period
   10,693   8,692 
          
Cash and Cash Equivalents and Restricted Cash, end of period
  
$
73,056
 
 
$
11,916
 
          
Non-cash
financing activities:
         
Capital leases  $346  $263 
Equity financing fees accrued   3,025   —   
Common shares issued to preferred shareholders
   56,502   —   
Equity financing fees settled in common shares
  
1,863
   
—
 
Common shares issued to warrant holders
  
10,663
   
—
 
Supplemental cash flow information:
         
Interest paid  $14,762  $16,879 
         
   
For the three months ended
 
   
March 31,
 
   
2022
  
2021
 
Cash flows from operating activities
         
Net loss  
$
(10,907)  
$
(1,081) 
Adjustments to reconcile net loss to net cash used in operating activities         
Depreciation and amortization   13,196   13,114 
Amortization of deferred financing costs   587   524 
Non-cash
reduction to the operating lease right-of-use assets
   587   0   
Deferred income taxes   (3,851)   (1,366) 
Non-cash
foreign currency loss
   (3)   (70) 
Share-based compensation   2,050   315 
Provision for doubtful accounts   55   (18) 
Change in fair value of warrant liability   (27)   (2,424) 
Change in operating assets and liabilities, net of operating assets and liabilities acquired:         
Accounts receivable   (2,580)   (1,855) 
Inventories   4,714   (878) 
Prepaid expenses and other receivables   806   (5,375) 
Accounts payable and accrued liabilities   (8,428)   (13,311) 
Deferred revenue   132   (81) 
Income taxes payable   199   186 
Operating lease liabilities

   (510)   0   
          
Net cash used in operating activities
  
$
(3,980
) 
 
$
(12,320
) 
          
Cash flows used in investing activities
         
Additions to intangible assets   (2,790)   (2,302) 
Additions to property and equipment   (635)   (789) 
Payments for acquisitions, net of cash acquired   (45,078)   0   
          
Net cash used in investing activities
  
$
(48,503
) 
 
$
(3,091
) 
          
Cash flows from financing activities
         
Proceeds from revolving credit facility   0     20,000 
Repayment of term loan   (788)   (797) 
Repayment of other borrowings—notes payable   (118)   0   
Equity financing fees   (126)   (445) 
Payment of deferred financing costs   (452)   (79) 
Payment of financing lease obligations   (66)   0   
Payment of capital lease obligations   0     (388) 
          
Net cash provided by/(used in) financing activities
  
$
(1,550
) 
 
$
18,291
 
          
Effect of Exchange Rate Change on Cash and Cash Equivalents   (26)   (67) 
Change in Cash and Cash Equivalents and Restricted Cash   (54,059)   2,813 
Cash and Cash Equivalents and Restricted Cash, beginning of period
  
 
86,343
 
 
 
10,693
 
          
Cash and Cash Equivalents and Restricted Cash, end of period
  
$
32,284
 
 
$
13,506
 
          
   
Supplemental cash flow information:
         
Interest paid  $7,717  $4,549 
Taxes paid   317   —   
Non-cash
investing and financing activities:
         
Fair value of KORE common stock issued pursuant to acquisitions  $23,295  $—   
ASU
2020-06
Adoption
   15,163   —   
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities upon the adoption of ASC 842

   9,604     
Operating lease
right-of-use
assets obtained in exchange for new operating lease liabilities
   420   —   
Equity financing fees accrued   —     1,590 
See accompanying notes to the unaudited condensed consolidated financial statements.statements
6
8
Table of Contents
KORE Group Holdings, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(In thousands USD, except share amounts) (unaudited)
NOTE 1 - NATURE OF OPERATIONS
Business Combination
KORE Group Holdings, Inc. and Subsidiaries (“the Company”) operates subject to the terms and conditions of the Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) dated September 30, 2021. On March 12, 2021, Maple Holdings Inc. (“Maple” or “pre-combination
“pre-combination
KORE”) entered into a definitive merger agreement (the “Business Combination”Combination Agreement”) with Cerberus Telecom Acquisition Corp. (NYSE: CTAC) (“CTAC”) (the Business Combination”).
On September 29, 2021, CTAC held a special meeting, at which CTAC’s shareholders voted to approve the proposals outlined in the proxy statement filed by CTAC with the Securities Exchange Commission (the “SEC”) on August 13, 2021, including, among other things, the adoption of the Business Combination and approval of the other transactions contemplated by the merger agreement.
On September 30, 2021 (the “Closing Date”), as contemplated by the merger agreement, (i) CTAC merged
with and into King LLC Merger Sub, LLC (“LLC Merger Sub”) (the “Pubco Merger”), with LLC Merger Sub being the surviving entity of the Pubco Merger and King Pubco, Inc. (“Pubco”) as
parent of the surviving entity, (ii) immediately prior to the First Merger (as defined below), Cerberus Telecom Acquisition Holdings, LLC (the
“Sponsor” “Sponsor”) contributed 100%
of its equity interests in King Corp Merger Sub, Inc. (“Corp Merger Sub”) to Pubco (the “Corp Merger Sub Contribution”), as a result of which Corp Merger Sub became a wholly owned subsidiary of Pubco, (iii) following the Corp Merger Sub Contribution, Corp Merger Sub merged with and into Maple into (the “First Merger”), with Maple being the surviving corporation of the First Merger, and (iv) immediately following the First Merger and as part of the same overall transaction as the First Merger, Maple merged with and into LLC Merger Sub (the “Second Merger” and, together with the First Merger, being collectively referred to as the “Mergers” and, together with the other transactions contemplated by the merger agreement, the “Transactions” and the closing of the Transactions, the Business Combination), with LLC Merger Sub being the surviving entity of the Second Merger and Pubco being the sole member of LLC Merger Sub. In connection with the Business Combination, Pubco changed its name to “KORE Group Holdings, Inc.” (the “Company”). The combined Company remained
was
listed on the NYSE under the new ticker symbol “KORE
“KORE”.
”
The Business Combination was accounted for as a reverse recapitalization whereby
pre-combination
KORE was determined to be the accounting acquirer and CTAC was treated as the “acquired” company for accounting purposes. The Business Combination was accounted as the equivalent of
pre-combination
KORE issuing stock for the net assets of CTAC, accompanied by a recapitalization whereby
pre-combination
KORE was determined to be the accounting acquirer.
The consolidated balance sheets, statements of operations and statements of temporary equity and stockholders’ equity and these notes to the consolidated financial statements reflect the reverse recapitalization as discussed above. Reported shares and earnings per share available to common stockholders, prior to the Business Combination, have been retroactively restated to reflect the exchange ratio established in the merger agreement. The number of shares of preferred stock was also retroactively restated based on the exchange ratio, approximately one
pre-combination
KORE share to 139.15 of the Company’s shares).
Organization
The Company provides advanced connectivity services, location-based services, device solutions, managed and professional services used in the development and support of IoT technology for the
Machine-to-Machine
(“M2M”) market. The Company’s IoT platform is delivered in partnership with the world’s largest mobile network operators and provides secure, reliable wireless connectivity to mobile and fixed devices. This technology enables the Company to expand its global technology platform by transferring capabilities across new and existing vertical markets and delivers complimentary products to channel partners and resellers worldwide.
The Company has operating subsidiaries located in Australia, Belgium, Brazil, Canada, Dominican Republic, Ireland, Malta, Mexico, the Netherlands, New Zealand, Singapore, Switzerland, the United Kingdom and the United States. The Company’s condensed consolidated financial statements (the “consolidated financial statements”) reflect its financial statements and those of its wholly owned subsidiaries.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
TheseThe accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC and, in accordance with thosegenerally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations, do not include allregulation of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and footnotenote disclosures normally included in annualthe financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.
We use the same accounting principles generally acceptedpolicies in the United States of America (“GAAP”)preparing quarterly and annual financial statements, unless noted otherwise below in “Changes to Significant Accounting Policies”. InCertain accounting policies are repeated to ensure the opinion of management, the unaudited condensed consolidated interim financial statements reflect all adjustments, which consist only of normal recurring adjustments, necessary to state fairly the results of operations, financial condition and cash flows for the interim periods presented herein. The preparation of unaudited condensed consolidated interim financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures.
Accordingly,are not misleading. Therefore, these interim condensed consolidated financial statements should be read in conjunction with Maple’s the auditedconsolidated financial statements and accompanying notes forincluded in the years ended December 31, 2020 and 2019 previously Company’s Annual Report on Form
10-K
filed with the SEC. SEC on March 30, 2022 (the “Annual Report”).
7
Table of Contents
The Condensed Consolidated Balance Sheet as of December 31, 2020, included herein, was derived from the auditedcondensed consolidated financial statements ofinclude the Company asand its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. In the opinion of that date. Themanagement, the accompanying condensed consolidated financial statement reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, temporary equity and stockholders’ equity and cash flows for anythe interim periodperiods but are not necessarily indicative of the results of operations to be expectedanticipated for the full year.year 2022 or any future period.
9
Table of Contents
The Business Combination is accounted
for as a reverse recapitalization as
pre-combination
KORE was determined to be the accounting acquirer under FASB’s ASC Topic 805, Business Combination (“ASC 805”).
Pre-combination
KORE was determined to be the accounting acquirer based on the evaluation of the following facts and circumstances:
the
equity
holders
of
pre-combination
KORE
hold
the
majority
(54%)
of
voting
rights
in
the
Company;
 
the
senior
management
of
pre-combination
KORE
became
the equity holders
senior
management
of
the
Company;
in
comparison
with
CTAC,
pre-combination
KORE hold the majority (54%) of voting rights in the Company;
has
significantly
more
revenues
and
total
assets
and
a larger
net
loss;
and
the senior management of
pre-combination
KORE became the senior management of the Company; and
In comparison with CTAC,
pre-combination
KORE has significantly more revenue and total assets and a larger net loss;
the operations of
pre-combination
KORE comprise the ongoing operations of the Company, and the Company assumed
pre-Combination
pre-combination KORE’s headquarters.
Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of
pre-combination
KORE with the acquisition being treated as the equivalent of
pre-combination
KORE issuing stock for the net assets of CTAC, accompanied by a recapitalization. The net assets of CTAC were stated at historical cost, with no goodwill or other intangible assets recorded.
Pre-combination
KORE was deemed to be the predecessor and the consolidated assets and liabilities and results of operations prior to September 30, 2021 are those of
pre-combination
KORE. Reported shares and earnings per share available to common stockholders, prior to the Business Combination, have been retroactively restated to reflect the exchange ratio established in the merger agreement. The number of shares of preferred stock was also retroactively restated based on the exchange ratio.
Use of Estimates
The preparation of condensed consolidated financial statements, in conformity with US GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition such as determining the nature and timing of the satisfaction of performance obligations, revenue reserves, allowances for accounts receivable, inventory obsolescence, the recognition and measurement of assets acquired and liabilities assumed in business combinations at fair value, assessment of indicators of goodwill impairment, determination of useful lives of the Company’s intangible assets and equipment, the assessment of expected cash flows used in evaluating long-lived assets for impairment, the calculation of capitalized software costs, accounting for uncertainties in income tax positions, and the value of securities underlying stock-based compensation. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from these estimates.
COVID-19
Impact
During the period ended September 30, 2021, an outbreak ofMarch 31, 2022, the novel coronavirus
(“COVID-19”)
has continued to spread across the globe and continued to result in significant economic disruption. The extent of the impact of
COVID-19
on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of any future outbreaks. As of the outbreak; howeverdate of this filing, the Company has experienced certain negative impacts from the pandemic, such as the loss of multiple smaller customers that experienced financial distress, resulting in payment delays and a reduction in revenue from those customers. Overall, as of the date of this filing,
COVID-19
has not had a significant negative impact on the Company.Company’s results of operations.
Revenue Recognition
The Company derives revenues primarily from IoT Connectivity and IoT Solutions.
IoT Connectivity arrangements provide customers with secure and reliable wireless connectivity to mobile and fixed devices through various mobile network carriers. Revenue from IoT Connectivity consists of monthly recurring charges (“MRC’s”) and overage/usage charges, and contracts are generally short-term in nature (i.e.,
month-to-month
arrangements). Revenue for
MRC’s and overage/usage charges are recognized over time
as the Company satisfies the performance obligation (generally starting when an enrolled device is activated on the Company’s platform). MRC’s are billed monthly in advance (generally in the last week of a month); any amounts billed for which the service has not been provided as of the balance sheet dates are reported as a contract liability and components of deferred revenue. Overage/usage charges are billed in arrears on a monthly cycle and are evaluated by management to determine whether they are likely to be collected due to a customer disputing the charge or due to a concession. If management deems an overage/usage charge to be non-collectible these overage/usage charges are not initially recognized as revenue and reserved for. These amounts are netted against accounts receivable and reversed when credited to the customer account generally no longer than one to two months after initial billing. Reserved items are written off when deemed uncollectible or recognized as revenue if collected. Certain IoT Connectivity customers also have the option to purchase products and/or equipment (e.g. subscriber identification module or “SIM” cards, routers, phones, or tablets) from the Company on an as needed basis. Product sales to IoT Connectivity customers are recognized when control is transferred to the customer, which is typically upon shipment of the product.
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IoT Solutions arrangements includes device solutions (including connectivity), deployment services, and/or technology-related professional services. Management evaluates each IoT Solutions arrangement to determine the contract for accounting purposes. If a contract contains more than one performance obligation, consideration is allocated to each performance obligation based on standalone selling prices. Device and other hardware sales in IoT Solutions arrangements are generally accounted for as separate contracts since the customer is not obligated to purchase additional services when committing to the purchase of any products. Such sales are typically recognized upon shipment to the customer. However, in certain contracts, the customer has requested the Company to hold the products ordered for later shipment to the customer’s remote location or to the customer’s end user as
a part of a vendor managed inventory model. In these situations, management has concluded that transfer of control to the customer occurs prior to shipment. In these
“bill-and-hold”
arrangements, the right to invoice, transfer of legal title and transfer of the risk and rewards associated with the products occurs when the Company receives the hardware from a third-party vendor and has deemed it to be functional. Additionally, the products are identified both physically and systematically as belonging to a specific customer, are usable by the customer, and are only shipped, used, or disposed as directed
by the specific customer. Based on these factors, management recognizes revenue on
bill-and-hold
hardware when the hardware is received by the Company and deemed functional. As part of the
bill-and-hold
arrangements, the Company performs a service related to the storage of the hardware. The Company has determined that any storage fee related to
bill-and-hold
inventory is immaterial to the condensed consolidated financial statements taken as a whole.
Deployment services consist of the Company preparing hardware owned by a customer for use by a customer’s end user. Deployment and connectivity may both be included within a single IoT Solutions contract and are considered separate performance obligations. While consideration for deployment services is generally fixed when ordered by the client, consideration for connectivity services is variable and solely related to the connectivity services. Therefore, the fixed consideration is allocated to the deployment services and is recognized as revenue when the services are provided (i.e. when the related hardware is shipped to the customer). Connectivity within IoT Solutions contracts are recognized similar to the IoT Connectivity as described above, since such contracts are generally short term in nature and variability is resolved each month as the services are provided.
Professional services are generally provided over a contract term of one to two months. Revenue is recognized over time on an input method basis
(typically, based on hours completed to date and an estimate of total hours to complete the project).
There are no material instances where variable consideration is constrained and not recorded at the initial time of sale. Product returns are recorded as a reduction to revenue based on anticipated sales returns that occur in the normal course of business and are immaterial for the three-month period ended March 31, 2022, and March 31, 2021, respectively. The Company primarily has assurance-type warranties that do not result in separate performance obligations.
The Company does not have material unfulfilled performance obligation balances for contracts with an original length greater than one year in any of the periods presented. Additionally, the Company does not have material costs related to obtaining a contract with amortization periods greater than one year for any of the periods presented.
The Company
applies
ASC
606
utilizing
the
following
allowable
exemptions
or
practical
expedients:
Exemption
to
not
disclose
the
unfulfilled
performance
obligation
balance
for
contracts
with
an
original
length
of
one
year
or
less.
Practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.
Election
to
present
revenue
net
of
sales
taxes
and
other
similar
taxes.
Election
from
recognizing
shipping
and
handling
activities
as
a separate
performance
obligation.
Practical expedient not requiring the entity to adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents include highly liquid instruments with an original maturity of less than 90 days from the date of purchase or the ability to redeem amounts on demand. Cash and cash equivalents are stated at cost, which approximates their fair value.
Restricted cash represents cash deposits held with financial institutions for letters of credit and is not available for general corporate purposes.
Concentrations of Credit Risk and
Off-Balance-Sheet
Risk
Cash and cash equivalents are financial instruments that are potentially subject to concentrations of credit risk. The Company’s cash and cash equivalents are deposited in accounts at large financial institutions, and amounts may exceed federally insured limits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash and cash equivalents are held. The Company has no other financial instruments with
off-balance-sheet
risk of loss.
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Table of Contents
Emerging Growth Company
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The Company qualifies as an “Emerging Growth Company” and has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows the Company to adopt the new or revised standardstandards at the same time as private companies.
Stock-Based Compensation
The Company has had several stock-based compensation plans, which are more fully described in “Note 10, Stock-Based Compensation”, to the consolidated financial statements. Stock-based compensation is generally recognized as an expense following straight-line attribution method over the requisite service period. The fair value of stock-based compensation is generally measured on the grant date based on the grant-date fair value of the awards.
Recently Adopted Accounting Pronouncements
The following Accounting Standard Updates (ASUs) were issued by Financial Accounting Standards Board (FASB) and have been recently adopted by KORE.
ASU
2016-02,
ASU
2018-10,
ASU
2018-11,
ASU
2020-03
and ASU
2020-05,
Leases (Topic 842)
In February 2016, the FASB issued ASU
2016-02,
Leases, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In July 2018, ASU
2018-10,
Codification Improvements to ASC
2016-02,
Leases, was issued to provide more detailed guidance and additional clarification for implementing ASU
2016-02.
Furthermore, in July 2018, the FASB issued ASU
2018-11,
Leases: Targeted Improvements, which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Furthermore, on June 3, 2020, the FASB deferred by one year the effective date of the new leases standard for private companies, private
not-for-profits
and public
not-for-profits
that have not yet issued (or made available for issuance) financial statements reflecting the new standard. Additionally, in March 2020, ASU
2020-03,
Codification Improvements to Financial Instruments, Leases, was issued to provide more detailed guidance and additional clarification for implementing ASU
2016-02.
Furthermore, in June 2020, ASU
2020-05,
Revenue from Contracts with Customers and Leases, was issued to defer effective dates of adoption of the new leasing standard beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. These new leasing standards (collectively “ASC 842” or “the new standard”) are effective for the Company beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted.
A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. We early adopted the new standard on January 1, 2022, which is the date as of our date of initial application. Consequently, financial information will not be updated, and the disclosures required under the new standard will not be provided for dates and periods ending before January 1, 2022.
The cumulative
after-tax
effect of the changes made to our condensed consolidated balance sheet for the adoption of Topic 842 were as follows:
(in ‘000 USD)

  
At December 31,
2021
   
Adjustments
due to

Topic 842
   
At
January 1
2022
 
Operating lease
right-of-use
assets
  $0     $9,278   $9,278 
Current operating lease liabilities   0      2,121    2,121 
Non-current
operating lease liabilities
   0      7,483    7,483 
Current portion of capital lease
liabilities
   191    (191)    0   
Current portion of finance lease
liabilities
   0      191    191 
Non-current
portion of capital lease
liabilities
   264    (264)    0   
Non-current
portion of finance lease
liabilities
   0      264    264 
Accrued liabilities   21,502    (326)    21,176 
In addition to the increase to the operating lease liabilities and
right-of-use
assets, Topic 842 also resulted in reclassifying the presentation of accrued liabilities and deferred rent to operating lease
right-of-use
assets.
We elected the package of practical expedients permitted under the transition guidance within the new standard. Accordingly, we have adopted these practical expedients and did not reassess: (1) whether an expired or existing contract is a lease or contains an embedded lease; (2) lease classification of an expired or existing lease; (3) capitalization of initial direct costs for an expired or existing lease.
 
10
Table of Contents
We lease real estate, computer hardware and vehicles for use in our operations under both operating and finance leases. We assess whether an arrangement is a lease or contains a lease at inception. For arrangements considered leases or that contain a lease that is accounted for separately, we determine the classification and initial measurement of the
Recently Adoptedright-of-use
asset and lease liability at the lease commencement date, which is the date that the underlying asset becomes available for use.
For both operating and finance leases, we recognize a
right-of-use
asset, which represents our right to use the underlying asset for the lease term, and a lease liability, which represents the present value of our obligation to make payments arising over the lease term. The present value of our obligation to make payments is calculated using the incremental borrowing rate for operating and finance leases. The incremental borrowing rate is determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. Management uses the unsecured borrowing rate and risk-adjusts that rate to approximate a collateralized rate, which will be updated on an annual basis for the measurement of new lease liabilities.
In those circumstances where the Company is the lessee, we have elected to account for
non-lease
components associated with our leases (e.g., common area maintenance costs) and lease components as a single lease component for all of our asset classes.
Operating lease cost for operating leases is recognized on a straight-line basis over the term of the lease and is included in selling, general and administrative expense in our condensed consolidated statements of operations, based on the use of the facility on which rent is being paid. Operating leases with a term of 12 months or less are not recorded on the balance sheet; we recognize a rent expense for these leases on a straight-line basis over the lease term.
We recognize the amortization of the
right-of-use
asset for our finance leases on a straight-line basis over the shorter of the term of the lease or the useful life of the
right-of-use
asset in depreciation and amortization expense in our condensed consolidated statements of operations. The interest expense related to finance leases is recognized using the effective interest method based on the discount rate determined at lease commencement and is included within interest expense in our condensed consolidated statements of operations.
See Note 5 for additional information related to leases, including disclosure required under Topic 842.
2019-12,
Income Taxes: Simplifying the Accounting Pronouncementfor Income Taxes.
In December 2019, the FASB issued Accounting Standards Update (“ASU”)
2019-12,
Income Taxes
:
Taxes: Simplifying the Accounting for Income Taxes
.Taxes. ASU
2019-12
simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU
2019-12
is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this standard as of January 1, 2021, and depending on the amendment, adoption was applied on a retrospective, modified retrospective, or prospective basis. The adoption of the standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
Recently IssuedASU
2018-15,
Customer’s Accounting Pronouncementsfor Implementation Costs Incurred in a Cloud Computing Arrangement
In February 2016, the FASB issued ASU
2016-02,
Leases
, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In July 2018, ASU
2018-10
, Codification Improvements to ASC
2016-02
,
Leases
, was issued to provide more detailed guidance and additional clarification for implementing ASU
2016-02.
Furthermore, in July 2018, the FASB issued ASU
2018-11,
Leases: Targeted Improvements
, which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the
period of adoption. Furthermore, on June 3, 2020, the FASB deferred by one year the effective date of the new leases standard for private companies, private
not-for-profits
and public
not-for-profits
that have not yet issued (or made available for issuance) financial statements reflecting the new standard. Additionally, in March 2020, ASU
2020-03,
Codification Improvements to Financial Instruments, Leases
, was issued to provide more detailed guidance and additional clarification for implementing ASU
2016-02.
Furthermore, in June 2020, ASU
2020-05,
Revenue from Contracts with
Customers and Leases
, was issued to defer effective dates of adoption of the new leasing standard beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.
These new leasing standards (collectively “ASC 842”) are effective for the Company beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted.
The Company is currently evaluating the effect of the adoption of this guidance on the consolidated financial statements. However, based on the Company’s lease obligations, the Company expects to recognize material assets and liabilities for
right-of-use
assets and operating lease liabilities on its consolidated balance sheet upon adoption of ASC 842. ASC 842 will also require additional footnote disclosures to the Company’s financial statements
.
In June 2016, the FASB issued ASU
2016-13
, Financial
Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments,
which requires the use of a new current expected credit loss (“CECL”) model in estimating allowances for doubtful accounts with respect to accounts receivable and notes receivable. Receivables from revenue transactions, or trade receivables, are recognized when the corresponding revenue is recognized under ASC 606,
Revenue from Contracts with Customers
. The CECL model requires that the Company estimate its lifetime expected credit loss with respect to these receivables and record allowances when deducted from the balance of the receivables, which represent the estimated net amounts expected to be collected. Given the generally short-term nature of trade receivables, the Company does not expect to apply a discounted cash flow methodology. However, the Company will consider whether historical loss rates are consistent with expectations of forward-looking estimates for its
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Table of Contents
trade receivables. In November 2018, the FASB issued ASU
2018-19,
Codification Improvements to Topic 326, Financial Instruments—Credit Losses
to clarify that operating lease receivables recorded by lessors are explicitly excluded from the scope of ASU
2016-13.
This ASU (collectively “ASC 326”) is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is still evaluating the impact of the adoption of this ASU.
In August 2018, the FASB issued ASU
2018-15,
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,
, which requires a customer in a hosting arrangement that is a service contract to apply the guidance on
internal-use
software to determine which implementation costs to recognize as an asset and which costs to expense. Costs to develop or obtain
internal-use
software that cannot be capitalized under Subtopic
350-40,
Internal-Use
Software,
, such as training costs and certain data conversion costs, also cannot be capitalized for a hosting arrangement that is a service contract. The amendments require a customer in a hosting arrangement that is a service contract to determine whether an implementation activity relates to the preliminary project stage, the application development stage, or the post-implementation stage. Costs for implementation activities in the application development stage will be capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages will be expensed immediately. The ASU is effective for the Company for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. Early adoption is permitted, including adoption in any interim period, for all entities. The Company is still evaluating the impactadopted this standard as of January 1, 2021. The adoption of the adoption of this standard.standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
In March 2020, the FASB issued
ASU
2020-04,2020-06,
Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting,
to provide guidance on easing the potential burden in accounting for reference rate reform on financial reporting. ASU 2020-04 is effective from March 12, 2020Debt—Debt with Conversion and may be applied prospectively through December 31, 2022. The Company is still evaluating the impact of the adoption of this ASU.Other Options (Subtopic
470-20)
In March 2020, the FASB issued ASU
2020-03,
Codification Improvements to Financial Instruments
, which clarifies specific issues raised by stakeholders. Specifically, the ASU:
Clarifies that all entities are required to provide the fair value option disclosures in ASC 825,
Financial Instruments
.
Clarifies that the portfolio exception in ASC 820,
Fair Value Measurement
, applies to nonfinancial items accounted for as derivatives under ASC 815,
and Derivatives and HedgingHedging— Contracts in Entity’s Own Equity (Subtopic
815-40)
.
Clarifies that for purposes of measuring expected credit losses on a net investment in a lease in accordance with ASC 326,
Financial Instruments - Credit Losses
, the lease term determined in accordance with ASC 842,
Leases
, should be used as the contractual term.
Clarifies that when an entity regains control of financial assets sold, it should recognize an allowance for credit losses in accordance with ASC 326.
Aligns the disclosure requirements for debt securities in ASC 320,
Investments—Debt Securities
, with the corresponding requirements for depository and lending institutions in ASC 942,
Financial Services—Depository and Lending
.
The amendments in the ASU have various effective dates and transition requirements, some depending on whether an entity has previously adopted ASU
2016-13
about measurement of expected credit losses. The Company will adopt the guidance in ASU
2020-03
as it adopts the related ASU effected by these codification improvements.
In August 2020, the FASB issued ASU
2020-06,
Debt—Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40)
(“ASU
2020-06”)
to simplify accounting for certain financial instruments. ASU
2020-06
eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU
2020-06
amends the diluted earnings per share guidance, including the requirement to use the
if-converted
method for all convertible instruments. ASU
2020-06
is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The CompanyEarly adoption is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations, or cash flows.
permitted, for fiscal years (including interim periods) beginning after December 15, 2020.
 
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Table of Contents
We early adopted ASU
In May 2021,2020-06
on January 1, 2022, using a modified retrospective transition approach. Consequently, financial information will not be updated, and the FASB issued disclosures required under the new standard will not be provided for dates and periods ending before January 1, 2022. Refer to “Note 7 –Short Term and Long-Term Debt”, to the condensed consolidated financial statements for further detail.
The cumulative
after-tax
effect of the changes made to our condensed consolidated balance sheet for the adoption of ASU
2020-06
were as follows:
             
(in ‘000 USD)

  
At December 31,
2021
   
Adjustments
due to

ASU 2020-06
   
At
January 1
2022
 
Long-term debt and other borrowings, net  $399,115   $15,163   $414,278 
Additional
paid-in
capital
   413,646    (11,612)    402,034 
Deferred tax   36,722    (3,847)    32,875 
Retained earnings   (138,179)    299    (137,880) 
ASU
2021-04,
Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options
,
In May 2021, the FASB issued ASU
2021-04,
Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, which provides guidance on modifications or exchanges of a freestanding equity-classified written call option that is not within the scope of another Topic. An entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument, and provides further guidance on measuring the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. ASU
2021-04
also provides guidance on the recognition of the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration. The amendments are
2021-04
was effective for all entitiesthe Company beginning on January 1, 2022, and we will apply the amendments prospectively through December 31, 2022. There was no impact to our condensed consolidated financial statements for the current period as a result of adopting this standard update.
Recently Issued Accounting Pronouncements
ASU
2016-13,
Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU
2016-13,
Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires the use of a new current expected credit loss (“CECL”) model in estimating allowances for doubtful accounts with respect to accounts receivable and notes receivable. Receivables from revenue transactions, or trade receivables, are recognized when the corresponding revenue is recognized under ASC 606, Revenue from Contracts with Customers. The CECL model requires that the Company estimate its lifetime expected credit loss with respect to these receivables and record allowances when deducted from the balance of the receivables, which represent the estimated net amounts expected to be collected. Given the generally short-term nature of trade receivables, the Company does not expect to apply a discounted cash flow methodology. However, the Company will consider whether historical loss rates are consistent with expectations of forward-looking estimates for its trade receivables. In November 2018, the FASB issued ASU
2018-19,
Codification Improvements to Topic 326, Financial Instruments—Credit Losses to clarify that operating lease receivables recorded by lessors are explicitly excluded from the scope of ASU
2016-13.
This ASU (collectively “ASC 326”) is effective for fiscal years beginning after December 15, 2021, including2023, and interim periods within those fiscal years. Early adoption is permitted. The Company is still evaluating the impact of the adoption of this standard.ASU.
ASU
2020-04,
Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting
In March 2020, the FASB issued ASU
2020-04,
Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to provide guidance on easing the potential burden in accounting for reference rate reform on financial reporting. ASU
2020-04
is effective from March 12, 2020 and may be applied prospectively through December 31, 2022. The Company is still evaluating the impact of the adoption of this ASU.
ASU
2020-03,
Codification Improvements to Financial Instruments
In March 2020, the FASB issued ASU
2020-03,
Codification Improvements to Financial Instruments, which clarifies specific issues raised by stakeholders. Specifically, the ASU:
Clarifies that all entities are required to provide the fair value option disclosures in ASC 825, Financial Instruments.
Clarifies that the portfolio exception in ASC 820, Fair Value Measurement, applies to nonfinancial items accounted for as derivatives under ASC 815, Derivatives and Hedging.
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Table of Contents
Clarifies that for purposes of measuring expected credit losses on a net investment in a lease in accordance with ASC 326, Financial Instruments—Credit Losses, the lease term determined in accordance with ASC 842, Leases, should be used as the contractual term.
Clarifies that when an entity regains control of financial assets sold, it should recognize an allowance for credit losses in accordance with ASC 326.
Aligns the disclosure requirements for debt securities in ASC 320, Investments—Debt Securities, with the corresponding requirements for depository and lending institutions in ASC 942, Financial Services—Depository and Lending.
The amendments in the ASU have various effective dates and transition requirements, some depending on whether an entity has previously adopted ASU
2016-13
about measurement of expected credit losses. The Company will adopt the guidance in ASU
2020-03
as it adopts the related ASU effected by these codification improvements.
NOTE 3 –- REVENUE RECOGNITION
The Company recognized all deferred revenue related to the connectivity performance obligations that were not fully satisfied in previous periods in the amount of $7.1 million and
 $7.8 
million for the three and nine months ended September 30, 2021, respectively. The Company does not have material unfulfilled performance obligation balances for contracts with an original length greater than one year in any periods presented. Additionally, the Company does not have material costs related to obtaining a contract with amortization periods greater than one year for any period presented. Th
e

Company applies ASC 606 utilizing the following allowable exemptions or practical expedients: 
Exemption to not disclose the unfulfilled performance obligation balance for contracts with an original length of one year or less.
Practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.
Election to present revenue net of sales taxes and other similar taxes.
Election from recognizing shipping and handling activities as a separate performance obligation.
Practical expedient not requiring the entity to adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
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Contract Balances
Deferred revenue as of September 30, 2021March 31, 2022 and December 31, 2020,2021, was $6.8$7.0 million and $7.8$6.9 
million, respectively, and primarily relates to revenue that is recognized over time for Connectivityconnectivity monthly recurring charges, the changes in balance of which are related to the satisfaction or partial satisfaction of these contracts. The balance also contains a deferral for goods that are
in-transit
at period end for which control transfers to the customer upon delivery. AllThe deferred revenue balance as of the December 31, 2020, balance2021 was recognized as revenue during the periodthree months ended SeptemberMarch 30, 2021.2022.
Disaggregated Revenue Information
The
In order to understand the composition of the Company’s revenues, the Company viewshas presented the following disaggregated disclosures asbelow which are useful to understand the composition of the Company’s revenue recognized during the respective three-month and nine-month reporting periods:periods shown below:
(in ‘000 USD)
  
For the three months ended
March 31,
 
   
2022
   
2021
 
         
Connectivity*  $43,016   $40,591 
Hardware Sales   19,012    7,796 
Hardware
Sales—bill-and-hold
   2,422    2,439 
Deployment services, professional services, and other   4,491    4,471 
           
Total
  
$
68,941
 
  
$
55,297
 
           
 
   
Three months ended
September 30,
   
Nine months ended
September 30,
 
(in ‘000)
  
2021
   
2020
   
2021
   
2020
 
Connectivity*  $40,738   $37,932   $122,444   $111,583 
Hardware Sales   19,221    9,345    40,602    23,276 
Hardware Sales -
bill-and-hold
   229    2,476    3,451    5,908 
Deployment services, professional services and other   7,690    5,504    17,422    15,530 
                     
Total
  
$
67,878
 
  
$
55,257
 
  
$
183,919
 
  
$
156,297
 
                     
*
Includes connectivity-related revenuerevenues from
IoT
Connectivity services and IoT Solutions
services
Significant Customer
The Company has one customer representing 28%17.8% and 18%15.2% of the Company’s total revenue for the three months ending September 30,March 31, 2022 and March 31, 2021, and September 30, 2020, respectively, and 21% and 16% of the Company’s total revenue for the nine months ending September 30, 2021, and September 30, 2020, respectively.
NOTE 4 –- REVERSE RECAPITALIZATION
On September 30, 2021,
pre-combination
KORE and CTAC consummated the merger contemplated by the merger agreement (see Note 1 – Nature of Operations).
Immediately following the Business Combination, there were 71,810,419 shares of common stock with a par value of $0.0001. Additionally, there were outstanding warrants to purchase 8,911,744
shares of common stock.
Refer to “Note 11 – Warrants on Common Stock” to the condensed consolidated financial statements. The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP, as pre-combination KORE was determinedsee “Note 1 – Nature of Operations” to be the accounting acquirer. Under this method of accounting, while CTAC was the legal acquirer, it has been treated as the “acquired” companyour condensed consolidated financial statements for financial reporting purposes. Accordingly, the Business Combination was treated as the equivalent of pre-combination KORE issuing stock for the net assets of CTAC, accompanied by a recapitalization. The net assets of CTAC were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of pre-combination KORE. Reported shares and earnings per share available to holders of the Company’s common stock, prior to the Business Combination, have been retroactively restated to reflect the exchange ratio established in the Business Combination (approximately one pre-combination KORE share to
 139.15 of the Company’s shares).
14further detail.
Table of Contents
The most significant change in the post-combination Company’s reported financial position and results was an increase in cash, net of transactions costs paid at close, of
$63.2 million including: $225.0 million in gross proceeds from the private placements (the “PIPE”), $20.0 million in proceeds from CTAC after redemptions, $95.1 
million in proceeds from the Backstop Notes, (see Note 5), and payments of
$229.9 
$229.9 million to KORE’s preferred shareholders. In connection with the Business Combination,
 $19.0 
million of transaction costs were paid on the Closing Date. The Company overpaid certain underwriting costs by $4.0 million on the Closing Date. The Company recorded the receivable related to this overpayment within prepaid expenses and other receivables in the Condensed Consolidated Balance Sheets as of September 30, 2021. The Company received payment of this amount subsequent to September 30, 2021. Additionally, on the Closing Date, the Company repaid the Senior Secured Revolving Credit Facility with UBS of
$25 
$25.0 million. The Company also repaid the outstanding related party loans due to Interfusion B.V and
T-Fone
B.V. of
$1.6
$1.6 million. Refer to Note 5 – Short-term“Note
7
 –Short Term and Long-term DebtLong-Term Debt” and Note 13“Note 1
3
 – Related Party Transactions.
Transactions,” to the condensed consolidated financial statements.
The Company incurred $23.7$24.2 million in transaction costs relating to the Business Combination on the Closing Date, of which $23.6$24.1 million has been recorded against additional
paid-in
capital in the Condensed Consolidated Balance Sheets and the remaining amountconsolidated balance sheet as of $0.1 million was recognized as selling, general and administrative expenses on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30,December 31, 2021.
Upon closing of the Business Combination, the shareholders of CTAC, including CTAC founders, were issued 10,356,593 shares of common stock of the Company. In connection with the closing, holders of 22,240,970 shares of common stock of CTAC were redeemed at a price per share of $10.00. In
connection with the Closing,
22,500,000 shares of the Company were issued to PIPE investors at a price per share of $10.00.
13
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The number of shares of Class A common stock issued immediately following the consummation of the Business Combination were:
         
   
Shares
   
Percentage
 
Pre-combination
KORE shareholders
   38,767,500    54.0% 
Public stockholders   10,356,593    14.4% 
Private offering and merger financing   22,686,326    31.6% 
Total   71,810,419    100.0% 
NOTE 5 –
RIGHT-OF
USE ASSETS AND LEASE LIABILITIES
We lease real estate, computer hardware and vehicles for use in our operations under both operating and finance leases. Our leases have remaining lease terms ranging from 1 year to 10 years, some of which include options to extend the term for up to 10 years, and some of which include options to terminate the leases. For the majority of leases entered into during the current period, we have concluded it is not reasonably certain that we would exercise the options to extend the lease or terminate the lease
 early
. Therefore, as of the lease commencement date, our lease terms generally do not include these options. We include options to extend the lease when it is reasonably certain that we will exercise that option.
Leasehold improvements are depreciated using the straight-line method over the shorter of the estimated useful life or the remaining term of the lease. Our leasehold improvements have lives ranging from 4-15 years. 
Operating lease cost for the three months ended March 31, 2022 and 2021 was
$0.8 million and $0.7 million, respectively.
 
   
Shares
   
Percentage
 
Pre-combination KORE shareholders
  38,767,500    
54.0
%
Public stockholders
  10,356,593    
14.4
%
Private offering and merger financing
  22,686,326    
31.6
%
         
Total
  71,810,419    
100.0
%
 
         
(in 000’ USD)
  
Classification in
Statement of operations
   
Three Months
Ended March 31,
2022
 
         
Operating lease cost   Selling, general and
administrative		   $844 
Finance lease cost          
Amortization of leased
assets
   Depreciation and amortization    98 
Interest on lease liabilities   Interest expense    5 
           
Total net lease cost
       
$
947
 
           
Supplemental disclosure for the balance sheet related to finance leases were as follows:
(in 000’ USD)

  
As of March 31, 2022
 
Assets
     
Finance lease right-of-use assets included in property and equipment, net
  $386 
Liabilities
     
Current portion of finance lease liabilities
  $158 
Non-current portion of finance lease liabilities
   228 
   
 
 
 
Total finance lease liabilities
  
$
386
 
   
 
 
 
The weighted-average remaining lease term and the weighted-average discount rate of our leases
were
as follows:
At March 31, 2022
Weighted average remaining lease term (in years)
Operating leases6.4
Finance leases2.5
Weighted average discount rate:
Operating leases7.1% 
Finance leases5.2% 
The future minimum lease payments under operating and finance leases as of March 31, 2022 for the next five years are as follows:
         
   
Operating

Leases
   
Finance
Leases
 
(in ‘000 USD)

  
Amount
   
Amount
 
From April 1, 2022 to December 31, 2022  $1,969   $130 
2023   2,189    141 
2024   1,476    118 
2025   1,313    25 
2026   1,041    0   
Thereafter  
 
4,141
 
  
 
0  
 
           
Total minimum lease payments
  
 
12,129
 
  
 
414
 
Interest expense
  
 
(2,672
) 
  
 
(28
) 
           
Total
  
$
9,457
 
  
$
386
 
           
NOTE 6 –ACQUISITIONS AND DIVESTITURES
BMP Business Combination
On February 16, 2022, the Company acquired 100% of the outstanding share capital of Business Mobility Partners, Inc. and Simon IoT
LLC
, collectively, the “Acquired Companies” or “BMP Acquisition” which are industry-leading mobility service providers, to expand the Company’s services and solutions within the healthcare and life sciences industries (the “BMP Business Combination Agreement”).
14
Table of Contents
The transaction was funded by available cash and the issuance of the Company’s shares. Estimated transaction costs for legal, consulting, accounting, and other related costs to be incurred in connection with the acquisition of the Acquired Companies are expected to be $1.7 million.
For the three months ended March 31, 2022, $1.4 million of transaction costs incurred were included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations. 
The following table summarizes the allocation of the consideration transferred for the Acquired Companies, including the identified assets acquired and liabilities assumed as of the acquisition date. The purchase price allocation is preliminary and is subject to revision as additional information about the fair value of the assets acquired and liabilities assumed, including certain working capital and income taxes, become available.
     
Cash, (net of closing cash of $1,995) and working capital adjustments  $45,078 
Fair value of KORE common stock issued to sellers (4,212,246 shares)   23,295 
      
Total consideration
  
$
68,373
 
Assets acquired:
     
Accounts receivable   3,303 
Inventories   1,323 
Prepaid expenses and other receivables   976 
Property and equipment   201 
Intangible assets   28,664 
      
Total Assets acquired
  
 
34,467
 
      
Liabilities assumed:
     
Deferred tax liabilities   7,391 
Accounts payable and accrued liabilities   3,562 
      
Liabilities assumed
  
 
10,953
 
      
Net identifiable assets acquired
  
 
23,514
 
      
Goodwill (excess of consideration transferred over net identifiable assets acquired)
  
$
44,859
 
      
Goodwill represents the future economic benefits that we expect to achieve as a result of the acquisition of the Acquired Companies. A portion of the goodwill resulting from the acquisition is deductible for tax purposes.
The Company’s Goodwill changed for the three months ended March 31, 2022, due to goodwill generated from the acquisition of the Acquired Companies of $44,859
and
currency translation adjustment of $(121). 
The BMP Business Combination Agreement contains customary indemnification terms. Under the BMP Business Combination Agreement, a portion of the cash purchase price, approximately $3.45 million paid at closing is being held in escrow, for a maximum of 18 months from the closing date, to guarantee performance of general representations and warranties regarding closing amounts and to indemnify the Company against any future claims.
 The financial results of the Acquired Companies are included in the Company’s condensed consolidated statements of operations from the date of acquisition. For the three months ended March 31, 2022, the amounts of revenue and net
income
included in the Company’s condensed consolidated statements of operations were $5,818 and 1,510, respectively.
Unaudited pro forma information
Had the acquisition of the Acquired Companies been completed on January 1, 2021, net revenue would have been
$
74.7
 and $
60.8
 million and the net loss would be approximately $
9.2
 and $
1.8
 million for the three months ended March 
31
,
2022
and
2021
, respectively. This unaudited pro forma financial information presented is not necessarily indicative of what the operating results actually would have been if the acquisition had taken place on January 
1
,
2021
, nor is it indicative of future operating results. The pro forma amounts include the historical operating results of the Company prior to the acquisition, with adjustments factually supportable and directly attributable to the acquisition, primarily related to transaction costs, and the amortization of intangible
assets. The pro forma net loss for the three months ended March 31, 2021 includes a non-recurring pro forma adjustment relating to the acquisition-related costs of $1.7 million.
NOTE 5 –7 - SHORT-TERM AND LONG-TERM DEBT
Senior Secured Term Loan - UBS—UBS
On December 21, 2018, the Company entered into
a
credit agreement with UBS that consisted of a term loan of $280.0 million as well as a senior secured revolving credit facility with UBS (the “Senior Secured UBS Term Loan”, and together with the senior secured revolving credit facility, the “Credit Facilities”). The Senior Secured UBS Term Loan required quarterly principal and interest payments with a
l
lof LIBOR plus 5.5%. All remaining principal and interest payments are due on December 21, 2024. The term loan had an interest rate of LIBOR plus 5.5%.
On November 12, 2019, the Company amended its term loan withthe Senior Secured UBS Term Loan in order to raise an additional $35.0 million. Under the amended agreement, the maturity date of the term loan and interest rate remained unchanged. However, the quarterly principal repayment changed to $0.8 million. The principal and quarterly interest are paid on the last business day of each quarter, except at maturity.
As a result of this debt modification, the Company incurred $1.5 
million in debt issuance costs, which was capitalized and is being amortized over the remaining term of the loan along with the unamortized debt issuance costs of the original debt.
The term loan agreement limits cash dividends and other distributions from the Company’s subsidiaries to the Company and restricts the Company’s ability to pay cash dividends to its shareholders. The term loan agreement contains, among other things, financial covenants related to maximum total debt to adjusted EBITDA ratio and a minimum total leverage ratio. The Company was in compliance with these covenants as of March 31, 2022 and December 31, 2021. The credit agreement is substantially secured by all the Company’s assets.
 
15
Table of Contents
The Company’s principal outstanding balances on the Senior Secured UBS Term Loan were $306.6 million$305.0 and $309.0$305.8 million as of September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.
Senior Secured Revolving Credit Facility - UBS—UBS
On December 21, 2018, the Company entered into a $30 
$30.0 million senior secured revolving credit facility with UBS. As of September 30, 2021UBS (the “Senior Secured Revolving Credit Facility”, and December 31, 2020,
0
outstanding amounts were drawn ontogether with the revolving credit facility. Immediately prior toSenior Secured UBS Term Loan, the Business Combination, the Company had an outstanding balance on the revolving credit facility of
$25 million, which was paid off in full at the close of the transaction on September 30, 2021.“Credit Facilities”).
Borrowings under the revolving debt facilitySenior Secured Revolving Credit Facility bear interest at a floating rate which can be, at the Company’s option, either (1) a LIBOR rate for a specified interest period plus an applicable margin of up to 5.50% or (2) a base rate plus an applicable margin of up to 4.5%. After the Closing Date, the applicable margins for LIBOR rate and base rate borrowings are each subject to a reduction to 5.25% and 4.25%, respectively, if the Company maintains a total leverage ratio of less than or equal to 5.00:1.00. The LIBOR rate applicable to the revolving credit facilitySenior Secured Revolving Credit Facility is subject to a “floor” of
0.0
% 0.0%. Additionally, the Company is required to pay a commitment fee of up to 0.50% per annum of the unused balance.
The obligations of the Company and the obligations of the guarantors under the Credit Facilities are secured by first priority pledges of and security interests in (i) substantially all of the existing and future equity interests of KORE Wireless Group Inc. and each of its subsidiaries organized in the U.S., as well as
65
%
of the existing and future equity interests of certain first-tier foreign subsidiaries held by the borrower or the guarantors under the Credit Facilities and (ii) substantially all of the KORE Wireless Group Inc.’s and each guarantor’s tangible and intangible assets, in each case subject to certain exceptions and thresholds.
As of March 31, 2022, and December 31, 2021, no outstanding amounts were drawn on the revolving credit facility.
Term Loan - Loan—BNP Paribas
The loan matured in
January 2021
and bore interest at 2.15% per annum with fixed payments of $7,740, which were payable monthly. On January 2, 2021, the Company extinguished the term loan outstanding with BNP Paribas by making the final fixed monthly payment.
Bank Overdraft Facility – Facility—BNP Paribas Fortis N.V.
On October 8, 2018, a Belgium subsidiary of the Company entered into a €250,000 bank overdraft facility with BNP Paribas Fortis. As of September 30, 2021 and December 31, 2020, the Company had €0 drawn on the revolving credit facility.Fortis, (the “Bank Overdraft Facility”). Borrowings under the bank overdraft facilityBank Overdraft Facility have an indefinite term.
Borrowings under the bank overdraft facilityBank Overdraft Facility bear interest at a floating rate which is a base rate plus an applicable margin of up to 2.0%. The base fee amounts to 9.4%9.40% as of September 30, 2021March 31, 2022 and is variable. Any overages are charged against a percentage of 6% on a yearly basis. There is 0 commitment fee payable for the unused balance of the bank overdraft facility.Bank Overdraft Facility.
As of March 31, 2022, and December 31, 2021, the Company had €0 drawn on the Bank Overdraft Facility.
Backstop Agreement
On September 30, 2021, KORE Wireless Group Inc. borrowed $95.1 Inc
. issued
$
95.1
million in exchange for senior unsecured exchangeable notes due 2028 (the “Backstop Notes”) to affiliates of Fortress Credit Corp. (“Fortress”) pursuant to the terms of the backstop agreement (the “Backstop Agreement”), dated July 27, 2021, by an
d
among KORE Wireless Group Inc. and Fortress. The Backstop Notes”)Notes were issued pursuant to an indenture (the “Indenture”), dated September 30, 2021, by and among KORE Group Holdings, Inc.,the Company, KORE Wireless Group Inc. and Wilmington Trust, National Association, as trustee, as amended and restated on November 15, 2021. On October 28, 2022, KORE Wireless Group issued an additional $24.9 million in additional notes (the “Additional Notes” and together with the Backstop Notes, the “Notes”) to Fortress, Credit Corp. (“Fortress”pursuant to the terms of an exchangeable notes purchase agreement (the “Exchangeable Notes Purchase Agreement”), dated October 28, 2021, by and among KORE Wireless Group Inc
.
,
 the Company and Fortress. The Additional Notes were issued pursuant to the Indenture and contain identical terms to the Backstop Notes. The Notes were issued at par, have a maturity of
seven years
, bearing interest at the rate of 5.50%
5.50
%
per annum which is paid quarterly,semi-annually, March 30 and a maturitySeptember 30 of
seven
years. each year, beginning on March 30, 2022. The Backstop Notes are guaranteed by the Company and are exchangeable into common stock of the Company at $12.50
$
12.50
per
share (the “Base Exchange Rate”)
at any time at the option of Fortress.
At the Base Exchange Rate, the Backstop Notes are exchangeable into 7.6
approximately
9.6
 million shares of common stock. As of March 31, 2022, the value of the
 
approximately
9.6
million shares underlying the Notes is less than the fair value of the Notes. The Base Exchange Rate may be adjusted for certain dilutive events or change in control events as defined by the Indenture Agreement (the “Adjusted Exchange Rate”). Additionally, if after the
2-year
2
-year
anniversary of the issuance of the Backstop NotesSeptember 30, 2021, the Company’s shares are trading at a defined premium to the Base Exchange Rate or applicable Adjusted Exchange Rate, the Company may redeem the Backstop Notes for cash, force an exchange into shares of its common stock at an amount per share based on a time-value make whole table, or settle with a combination of cash and an exchange
(the (the “Company Option”). SinceAs consideration for Fortress entering into that certain commitment letter (the “Commitment Letter”), dated as of September 21, 2021, the Sponsor contributed
100,000
shares of common stock of the Company mayto LLC Merger Sub, which were transferred by LLC Merger Sub to Fortress, as a commitment fee, pursuant to the terms and upon the conditions set forth in the Commitment Letter. Prior to the implementation of ASU
2020-06,
since the Company could use the Company Option to potentially settle all or part of the Backstop Notes for the cash equivalent of the fair value of the common stock for which the notesNotes may be exchanged, a portion of the proceeds of the Backstop Notes have beenwere required to be allocated to equity, based on the estimated fair value of Backstop
the
Notes had they not contained the exchange features. As of September 30, 2021:ASU
2020-06,
simplifies and amends the carrying amountcash conversion guidance so that
the
Company is no longer required to allocate to equity the estimated fair value of the equity component was $12.5 million, netNotes had they not contained the exchange features. Refer to “Note
2-
Summary of allocation issuance costsSignificant Accounting policies – Recently Adopted Accounting Pronouncements” to the condensed consolidated financial statements for a summary of $0.2 million; the liability component consistedeffects of principal, unamortized discount, and unamortized issuance coststhe adoption of $95.1 million, $12.7 million, and $1.5 million, respectively; and the net carrying amount is $80.9 million. ASU
2020-06.
The unamortized discount and issuance costs will be amortized through September 30, 2028. The effective interest rate after the adoption of the liability component isASU
8.42020-06
%. NaN interest cost was recognized on for the Backstop Notes forand the three monthAdditional Backstop Notes is 5.9% and nine month periods ended September 30, 2021.6.1% respectively.
The Backstop Agreement and the Exchangeable Notes Purchase Agreement each contain a
customary six-month lock
up following the Closing, which prohibits Fortress from hedging the Notes by short selling the Company’s common stock or hedging the Notes via the Company’s warrants or options.
 
16
Table of Contents
The Indenture contains, among other things, financial covenants related to maximum total debt to adjusted EBITDA ratio. The Company was in compliance with these covenants as of March 31, 2022 and December 31, 2021.
The Backstop Agreement containstable below outlines the principal balances and net carrying amounts outstanding of the Notes:
   
Post ASU 2020-06

As of
March 31,
   
Pre ASU 2020-06

As of
December 31,
 
(in ‘000 USD)
  
2022
   
2021
 
Principal balances outstanding  $120,000   $120,000 
Net of unamortized debt issuance costs   2,744    2,458 
Net of unamortized equity component costs   0      15,517 
           
Net carrying
amount(1)
  
$
117,256
 
  
$
102,025
 
           
(1) Due to the adoption of ASU
2020-06
the net carrying amount of the Notes changed. Refer to “Note
2-Summary
of Significant Accounting policies – Recently Adopted Accounting Pronouncements” to the condensed consolidated financial statements for a customary
six-month
lock up followingsummary of the closing, which prohibits Fortress from hedgingeffects of the Backstop Notes by short selling the Company’s common stock or hedging the notes via the Company’s warrants or options.adoption of ASU
2020-06.
NOTE 6 –8 - INCOME TAXES
The Company determines its estimated annual effective tax rate at the end of each interim
period
based on estimated
pre-tax
income (loss) and
facts known at that time. The estimated annual effective tax rate is applied to the
year-to-date
pre-tax
income (loss) at
the end of each interim period with certain adjustments. The tax effects of significant unusual or extraordinary items are reflected as discrete adjustments in the periods in which they occur. The Company’s estimated annual effective tax rate can change based on the mix of jurisdictional
pre-tax
income (loss) and
other factors. However, if the Company is unable to make a reliable estimate of its annual effective tax rate, then the actual effective tax rate for the year to date
year-to-date
period may be the best estimate. For the ninethree months ended September 30,March 31, 2022, and 2021, and 2020, the Company determined that its annual effective tax rate approach would provide for a reliable estimate and therefore used this method to calculate its tax provision.
The Company’s effective income tax rate was
 45.1% and 21.2%
for the three months ended September 30, 2021 and 2020, respectively. The income tax provision (benefit) was
$(3,710) and ($1,518)
for the three months ended September 30, 2021 and 2020, respectively. The change in the income tax benefit for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 was primarily due to changes in the jurisdictional mix of earnings and the impact of the change in fair value of warrant liability which is not taxable.
The Company’s effective income tax rate was 37.9%19.1% and 21.6%53.9% for the ninethree months ended September 30,March 31, 2022, and 2021, and 2020, respectively. The provision for (benefit from) income taxestax benefit was $(7,628)$2.5 and ($5,376)$1.3 million for the ninethree months ended September 30,March 31, 2022, and 2021, and 2020, respectively. The change in the provision for (benefit from) income taxes for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was primarily due to changes in the jurisdictional mix of earnings and the impact of the change in fair value of warrant liability which is not taxable.
The effective income tax rate for the three and nine months ended September 30,March 31, 2022, and 2021 and 2020 differed from the federal statutory rate primarily due to the geographical mix of earnings and related foreign tax rate differential, permanent differences, research and development tax credits, and the valuation allowance maintained against certain deferred tax assets.
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases various office spaces under
non-cancellable
operating leases expiring through 2029. Rent expense for the three months ended September 30, 2021 and 2020 was $0.6 million and $0.7 million, respectively. Rent expense for both the nine months ended September 30, 2021 and 2020 was $2.0 million.
17
Table of Contents
The future minimum lease payments under operating leases as of September 30, 2021 for the next five years is as follows:
(in ‘000)
  
      Amount
 
From October 1, 2021 to December 31, 2021  $781 
2022   2,437 
2023   1,448 
2024   1,076 
2025   749 
Thereafter   2,157 
      
Total
  
$
 8,648
 
      
Off-Balance-Sheet
Credit Exposures
The Company has standby letters of credit and bank guarantees of $0.4 million as of September 30, 2021 and December 31, 2020, respectively. These contingent liabilities are secured by highly liquid instruments included in restricted cash.
Purchase Obligations
The Company has vendor commitments primarily relating to carrier and open purchase obligations that the Company incurs in the ordinary course of business. As of September 30, 2021, the purchase commitments were as follows:
(in ‘000)
  
      Amount
 
From October 1, 2021 to December 31, 2021  $15,195 
2022   6,871 
2023   1,286 
2024   1,286 
2025   1,286 
      
Total
  
$
25,924
 
      
Legal Proceedings
From time to time, the Company is involved in litigation arising out of the ordinary course of our business. There are no material legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of the Company’s subsidiaries are a party or of which any of the Company or the Company’s subsidiaries’ property is subject.
NOTE 8 – PREPAID AND
OTHER RECEIVABLES 
Prepaid Expenses and Other Receivables
The Company’s prepaid expenses and other receivables consist of the following:
   
September 30,
2021
   
December 31,
2020
 
Prepaid Deposits  $4,906   $ 1,734 
Prepaid Expenses   5,598    3,695 
Other
Receivables
  
4,036
   
0
 
           
Total Prepaid Expenses and Other Receivables  $  14,540   $5,429 
           
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Table of Contents
NOTE 9 –- TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY
The Company operates subject to the terms and conditions of the Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) dated September 30, 2021. March 31, 2022. Prior to the Business Combination
pre-combination
KORE had a different capital structure comprised of several classes of preferred stock and warrants. As a result of the Business Combination these were settled, however the Company believes a continued discussion is beneficial to readers of the Company’s condensed consolidated financial statements for the period ended March 31, 2022.

Capital Stock
As of September 30, 2021;March 31, 2022, the Company authorized up to 350,000,000 shares of capital stock, consisting of 315,000,000 shares of common stock and 35,000,000 shares of preferred stock. As of September 30, 2021, 71,810,419March 31, 2022, 76,239,989 shares of common stock and 0 shares of preferred stock were issued and outstanding.
Pre-Combination Kore Series A Preferred Stock
The Board
Prior to the Business Combination, the board of pre-combination KORE authorized up to
7,765,229
Series A preferred shares. As of September 30, 2021 and December 31, 2020, there were 0 and 7,756,158 Series A preferred shares issued and outstanding, respectively. The shares were issued at a discount of 2%
2
%.
Series A preferred shareholders arewere entitled to receive a cumulative preferred dividend at the rate of thirteen percent (13%
(13
%)
per year on the sum of the par value plus unpaid preferred dividends through the date of such distribution on a pari passu basis with Series
A-1
and Series B shareholders and in preference to all other shareholders. The Company had the option to redeem the Series A preferred shares for par value plus unpaid preferred dividends. Series A preferred shareholders had an option to put the shares back to the Company for par value plus unpaid preferred dividends on or after April 11, 2027. The Company determined that the put option is a redemption event not solely within the control of the Company. Therefore, the Series A preferred stock iswere classified outside of permanent equity (i.e., temporary equity) and presented at its redemption value. Upon closing of the Business Combination, all Series A preferred shares were settled with a redemption value of $85.2 
$
85.2
million in cash. The Company no longer had shares of Series A Preferred Stock authorized, issued or outstanding as of September 30, 2021. The terms and rights of the Series A Preferred Stock described previously represent the terms and rights prior to the closing of the Business Combination. 
Pre-Combination Kore Series
A-1
Preferred Stock
The Board
Prior to the Business Combination, the board of pre-combination KORE authorized up to
 10,480,538
Series
A-1
preferred shares. As of September 30, 2021 and December 31, 2020, there were 0 and 7,862,107 Series
A-1
preferred shares issued and outstanding, respectively. The shares were issued at a discount
of
2%.
Series
A-1
preferred shareholders arewere entitled to receive a cumulative preferred dividend at the rate of thirteen-point seven five percent
(13.75%) per year on the sum
17
Table of Contents
of the par value plus unpaid preferred dividends through the date of such distribution on a pari passu basis with Series A and Series B shareholders and in preference to all other shareholders. The Company had the option to redeem the Series
A-1
Preferred shares for par value plus unpaid preferred dividends subject to a current redemption premium of 1%.one percent. Series
A-1
preferred shareholders had an option to put the shares back to the Company for par value plus unpaid preferred dividends on or after April 11, 2027. The Company determined that the put option is a redemption event not solely within the control of the Company. Therefore, the Series
A-1
Preferred Stock iswas classified outside of permanent equity (i.e., temporary equity) and presented at its redemption value. Upon closing of the Business Combination, all Series
A-1
preferred shares were settled with a redemption value ofo
f $86.9 
million. Certain Series
A-1
preferred shareholders elected to received shares of common stock of the Company in lieu of cash. The Company no longer had shares of Series A-1 Preferred Stock authorized, issued or outstanding as of September 30, 2021. The terms and rights of the Series A-1 Preferred Stock described previously represent the terms and rights prior to the closing of the Business Combination. 
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Table of Contents
Pre-Combination Kore Series B Preferred Stock
The Board
Prior to the Business Combination, the board of pre-combination KORE authorized up to
9,090,975
Series B preferred shares. As of September 30, 2021 and December 31, 2020, there were 0 and 9,090,975 Series B preferred shares issued and outstanding, respectively. Series B preferred shareholders arewere entitled to receive a cumulative preferred dividend at the rate of ten percentpercen
t (10%)
per year on the sum of the unreturned par value plus unpaid preferred dividends through the date of such distribution on a pari passu basis with Series A and Series
A-1
shareholders and in preference to all other shareholders. On or after October 11, 2018, the Company hashad the option to redeem the Series B Preferred shares for par value plus unpaid preferred dividends. Because the controlling shareholder iswas the majority holder of Series B preferred shares, the Company redemption option functionsfunctioned as a holder put option. Accordingly, the Company determined that the option could result in a redemption that is not solely within the control of the Company. Therefore, the Series B Preferred stock iswas classified outside of permanent equity (i.e., temporary equity) and presented at its redemption value each period. Upon closing of the Business Combination, all Series B preferred shares were settled with a redemption value of $97.8 
$97.8 million. Certain Series B preferred shareholders elected to received shares of common stock of the Company in lieu of cash. The Company no longer had shares of Series B Preferred Stock authorized, issued or outstanding as of
September 30, 2021. The terms and rights of the Series B Preferred Stock described previously represent the terms and rights prior to the closing
As a result of the Business Combination.Combination on September 30, 2021, all classes of the pre-combination KORE’s preferred shares were settled for cash or converted into common stock. As a result, 
0 accumulated or distributed earnings were accrued or paid after September 30, 2021.
A summary of the accumulated but unpaid preferred dividends for the Series A, Series
A-1
and Series B preferred shares as of March 31, June 30, and September 30, 2021, and March 31, June 30, and September 30, 2020, is as follows:
 
                                                                
(in ‘000)
  
Series A
   
Series
A-1
   
Series B
 
Accumulated and unpaid, December 31, 2020
  
$
34,812
 
  
$
18,608
 
  
$
33,910
 
Accumulated   2,486    2,666    2,241 
Distributed   0      0      0   
                
Accumulated and unpaid, March 31, 2021
  
$
37,298
 
  
$
21,274
 
  
$
36,151
 
                
Accumulated   2,514    2,695    2,323 
                
Distributed  
 
0  
 
  
 
0  
 
  
 
0  
 
                
Accumulated and unpaid, June 30, 2021
  
$
39,812
 
  
$
23,969
 
  
$
38,474
 
                
Accumulated   2,656    2,880    2,361 
                
Distributed   (42,468)    (26,849)    (40,835) 
                
Accumulated and unpaid, September 30, 2021
  
$
0  
 
  
$
0  
 
  
$
0  
 
                
                                                                
(in ‘000)
  
Series A
   
Series A-1
   
Series B
 
Accumulated and unpaid, December 31, 2019
  
$
25,610
 
  
$
8,794
 
  
$
25,338
 
Accumulated   2,216    2,359    2,053 
Distributed   0      0      0   
                
Accumulated and unpaid, March 31, 2020
  
$
27,826
 
  
$
11,153
 
  
$
27,391
 
                
Accumulated   2,215    2,359    2,104 
                
Distributed  
 
0  
 
   0      0   
                
Accumulated and unpaid, June 30, 2020
  
$
30,041
 
  
$
13,512
 
  
$
29,495
 
                
Accumulated   2,385    2,548    2,180 
                
Distributed  
 
0  
 
  
 
0  
 
  
 
0  
 
                
Accumulated and unpaid, September 30, 2020
  
 
32,426
 
  
 
16,060
 
  
 
31,675
 
                
20
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(in ‘000 USD)

  
Series A
   
Series A-1
   
Series B
 
Accumulated and unpaid, December 31, 2020
  
$
34,812
 
  
$
18,608
 
  
$
33,910
 
Accumulated   2,486    2,666    2,241 
Distributed   0      0      0   
                
Accumulated and unpaid, March 31, 2021
  
$
37,298
 
  
$
21,274
 
  
$
36,151
 
                
The redemption value of Series A, Series
A-1
and Series B preferred stock is equal to the par value of $1,000 per share plus the above accumulated unpaid dividends and any applicable redemption premium.
Pre-Combination Kore Series C Convertible Preferred Stock
The Board
Prior to the Business Combination, the board of pre-combination KORE authorized up to
 6,872,894 Series C convertible preferred
shares
. As of September 30, 2021 and December 31, 2020, there were 0 and 2,566,186 Series C convertible preferred shares issued and outstanding, respectively.shares. Subordinate to the payment of dividends to Series A, Series
A-1
and Series B preferred shareholders, the Series C shareholders arewere entitled to receive dividends equal to
 1.5X
initial investment in conjunction with common stock, then subject to a
catch-up,
followed by pro rata sharing thereafter. Series C convertible preferred shareholders have a de facto option to put the shares back to the Company for liquidation value. The Company determined that the option could result in a deemed liquidation that is not solely within the control of the Company. Therefore, the Series C convertible preferred stock iswas classified outside of permanent equity (i.e., temporary equity).
Series C convertible preferred shares arewere convertible at any time, at the option of the holder, into common stock at a rate of 1 to 1 initially, subject to adjustments for dilution.
Upon closing of the Business Combination,
16,802
shares of Series C Convertible Preferred Stock
(pre-combination)
converted into
2,520,368
shares of common stock of the Company. The Company no longer had Series C Convertible Preferred
NOTE 1
0
 – STOCK-BASED COMPENSATION
Share-Based Compensation Plans
We have granted stock options and restricted stock units (“RSUs”) to certain of our employees and directors pursuant to our stock incentive plans. Stock authorized, issued or outstanding as of
September 30, 2021. The terms and rightsoptions have an exercise price equal to the fair market value of the Series C Convertible Preferred Stock described previously representshares on the termsdate of grant and rights priorgenerally expire 10 years from the date of grant. An RSU is a contractual right to receive one share of our common stock in the closingfuture, and the fair value of the RSU is based on our share price on the grant date.
The Company’s
time-based
RSUs generally vest
one-quarter
on each of the second and third anniversaries of the Business Combination date and the remaining
.one-half
on the fourth anniversary of the Business Combination date; however, certain special retention awards may have different vesting terms. In addition, grants of RSUs to our
non-employee
directors and certain executive officers contain provisions as part of the respective employment agreements that accelerate the vesting of RSU grants in the event of a termination by the Company or a departure by a director or executive officers.
 
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NOTE 10 – SHARE-BASED PAYMENT AND RELATED STOCK OPTION PLAN
We also grant
performance-based
RSUs that vest subject to the achievement of specified performance goals within a specified time-frame. The
performance-based
RSUs contain provisions that increase or decrease the number of RSUs that ultimately vest, depending upon the level of performance achieved.
We have also granted RSUs that vest based upon the price of our common stock, which is a market condition. The fair value of awards that contain a
market-based
condition is estimated using a lattice model to analyze the fair value of the subject shares. The lattice model utilizes multiple stock paths, which are analyzed to determine the fair value of the subject shares.
Stock Options
Pre-Combination Kore 2014 Equity Incentive Plan
During 2020, the Companypre-combination KORE granted awards to certain employees and Board members of the Company.pre-combination KORE board members. Under thepre-combination KORE’s 2014 Equity Incentive Plan (the “Plan”“2014 Plan”), the Board isboard of pre-combination KORE was authorized to grant stock options to eligible employees and directors of the Company.pre-combination KORE. The fair value of the options was expensed on a straight-line basis over the requisite service period, which is generally the vesting period.
In connection The Plan was terminated on September 30, 2021 in conjunction with the Business Combination a modification in the existing terms of the options was introduced to add contingent cash-settlement feature pursuant to which each option holder entered into option cancellation agreement (“Cancellation Agreements”), whereby option holders agreed to surrender all options outstanding as of the closing of the Business Combination for cancellation effective immediately prior to the closing. In exchange for the cancellation of the vested and unvested options, option holders are entitled to right to receive payment of Option Cash Consideration equal to

$4,075,000 and Option Share Consideration,
of
432,500 common shares ($3,377,825
value)
in the surviving entity less applicable withholding taxes and without interest, paid on the first payroll cycle following the closing of the Business Combination. Upon the closing of the Business Combination, the Company recognized a liability for the fair value of the Option Cash Consideration and Option Share Consideration. An expense was recognized for the difference between the previously recognized portion of grant date fair value and the fair value of the recorded liability.
Stock based compensation expense during the three-month period ended September 
30
,
2021
, and September 
30
,
2020
was $
3.9
and $
0.3
 million respectively. Stock based compensation expense during the nine-month period ended September 
30
,
2021
and September 
30
,
2020
was $
4.6
 million and $
0.8
 million, respectively.
The Company has determined its share-based payments to be a Level 3 fair value measurement and has used the Black-Scholes option pricing model to calculate its fair value using the following assumptions:
September 30, 2020
Risk-free interest rate1.58 - 2.47%
Expected term (life) of options (in years)2-4
Expected dividends0%
Expected volatility67.9 - 86.3%
22
Table of Contents
The Company did not grant any awards during the nine month period ended September 30, 2021. The expected term of the options granted are determined based on the period of time the options are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. In selecting similar entities for determining expected volatility, the Company considered industry, stage of life cycle, size and financial leverage. The dividend yield on the Company’s options is assumed to be zero since the Company has not historically paid dividends.
The following is a summary of the Company’spre-combination KORE’s stock options as of September 30,March 31, 2021, and September 30, 2020 and the stock option activity from December 31, 2020 through September 30, 2021 and DecemberMarch 31, 2019 through September 30, 2020:
                                                                                                 
   
Number of
Options
   
Weighted
Average
Grant Date
Fair Value
per Option
(Amount)
   
Weighted
Average
Exercise
Price
(Amount)
   
Weighted
Average
Remaining
Contractual
Term
(Years)
 
Balance, December 31, 2020
  
 
34,977
 
  
 
191
 
  
$
1,750
 
  
 
7.7
 
                     
Granted  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
                     
Exercised  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
                     
Forfeited  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
                     
Expired  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
                     
Cancelled   (34,977)    (191)    (1,750)    (7.7) 
                     
Balance, September 30, 2021
  
 
0  
 
  
$
0  
 
  
$
0  
 
  
 
—  
 
                     
                                                                                                 
   
Number of
Options
   
Weighted
Average
Grant Date
Fair Value
per Option
(Amount)
   
Weighted
Average
Exercise
Price
(Amount)
   
Weighted
Average
Remaining
Contractual
Term
(Years)
 
Balance, December 31, 2019
  
 
32,280
 
  
 
196
 
  
$
1,750
 
  
 
8.4
 
                     
Granted   5,181    167    1,750    —   
                     
Exercised  
 
—  
 
   —      —      —   
                     
Forfeited   (2,484)    195    1,750    —   
                     
Expired  
 
—  
 
   —      —      —   
                     
Balance, September 30, 2020
  
 
34,977
 
  
$
191
 
  
$
1,750
 
  
 
7.9
 
                     
23
2021:

   
Number of
Options
   
Weighted
Average Grant
Date Fair Value
per Option
(Amount)
   
Weighted
Average
Exercise Price
(Amount)
   
Weighted Average
Remaining
Contractual Term
(Years)
 
Balance, December 31, 2020
  
 
432,500
 
  
$
15.45
 
  
$
141.53
 
  
 
7.7
 
Granted   0      0      0      —   
Exercised   —      —      —      —   
Forfeited   0      0      0      —   
Expired   —      —      —      —   
                     
Balance, March 31, 2021
  
 
432,500
 
  
$
15.45
 
  
$
141.53
 
  
 
7.7
 
                     
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The following is a summary of the Company’s share-based compensation expense related to stock options during the respective three-month and nine-month reporting periods:periods shown below
:
 
   
Three months ended
September 30,
   
Nine months ended
September 30,
 
(in ‘000)
  
2021
   
2020
   
2021
   
2020
 
Total share-based compensation expense  $ 3,933   $ 315   $ 4,564   $ 846 
   
For the three months ended
 
   
March 31,
 
(in ‘000 USD)
  
2022
   
2021
 
         
Total Stock Compensation Expense  $0     $315 
Unrecognized Compensation Cost   0      3,100 
Weighted-average remaining recognition period (in years)   —      2.4 
As of September 30, 2021, there was 0 unrecognized compensation cost related to outstanding stock options.
Restricted Stock Units
2021 Long-Term Stock Incentive Plan
On September 29, 2021, the board of directors (the “Board”) approved the KORE Group Holdings, Inc. 2021 Long-Term Stock Incentive Plan (the “2021 Plan”) to promote the interests of the Company and its stockholders by (i) attracting and retaining employees and directors of, and consultants to, the Company and its subsidiaries; (ii) motivating such individuals by means of performance-related incentives to achieve longer-range performance goals; and (iii) enabling such individuals to participate in the long-term growth and financial success of the Company. The 2021 Plan allows for the grant of share-based payment awards to employees, directors of the Board, and consultants to the Company. The 2021 Plan is administered by the Compensation Committee of the Board. On December 8, 2021, the Compensation Committee of the Board approved the future grants of certain Restricted Stock Unit Awards, the effectiveness of which were contingent upon the filing and effectiveness of the Form
S-8
Registration Statement of the common stock, which occurred on January 4, 2022.
The following table summarizes RSU activity during the reporting periods shown below:
             
(in 000’ USD, except shares)

  
Number of
Awards
outstanding
   
Weighted-
Average
grant date
fair value
(per share)
   
Aggregate
Intrinsic

Value

(in Thousands)
 
Unvested RSUs at December 31, 2021   0     $0      0   
Granted   4,763    6.84    32,587 
Vested   0      0      0   
Forfeited and canceled   (35)    6.97    (245) 
                
Unvested RSUs at March 31, 2022
  
 
4,728
 
  
$
 
 
  
$
32,342
 
                
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Table of Contents
During the three months ended March 31, 2022 the Company granted
 3.4 million RSUs that vest based on the passage of time.
The actual number of performance-based RSUs that could vest will range from 0% to 150% of the 1.2 million unvested RSUs granted, depending upon our level of achievement with respect to the performance goals.
For certain executive officers the Company granted RSU grants, which vest based on the Company’s stock price, a market-based condition. These grants will vest in quantities ranging from approximately 26.6 – 89.9 thousand (up to 171.8 thousand in aggregate) upon the Company’s common stock attaining a closing price equal to or greater than $13, $15, or $18 per share over any 20 trading days within any 30 consecutive trading day period. The fair value of these RSUs is estimated through the use of a lattice model. Significant inputs used in our valuation of these RSUs included the following:
Three months ended
March 31,
(in ‘000 USD)
2022
Expected volatility57.1%-75.2%
Risk-free interest rate1.37%-2.09%
The following is a summary of the Company’s share-based compensation expense related to RSUs during the reporting periods shown below
:
   
For the three months ended
 
   
March 31,
 
(in ‘000 USD)
  
2022
   
2021
 
         
Total Stock Compensation Expense  $2,050   $0   
Unrecognized Compensation Cost   30,292    0   
Weighted-average remaining recognition period (in years)   3.53    —   
NOTE 111
1
 – WARRANTS ON COMMON STOCK
Prior to the
B
usiness
C
ombination
KORE Warrantspre-combination
Kore had a different capital structure comprised of several classes of preferred stock and warrants. As a result of the Business Combination, the preferred stock and warrants were settled as discussed below; however, the Company believes a continued discussion is beneficial to readers of the Company’s condensed consolidated financial statements for the period ended March 31, 2022.
Pre-Combination KORE Warrants
In
Prior to the
B
usiness
C
ombination, in connection with the sale of Series B preferred stock,
pre-combination
KORE issued warrants (“KORE Warrants”) for the purchase of common stock at an exercise price of
 $0.01 per warrant. As of September 30, 2021March 31, 2022, and December 31, 2020,2021, there were 0and 9,8140 KORE Warrants issued and outstanding, respectively. Upon closing of the Business Combination, all KORE Warrants were exercised and converted into 1,365,3121,365,612 shares of commo
n
common stock.
The Company
Pre-combination KORE evaluated the KORE
 Warrants
 for liability or equity classification in accordance with the provisions of ASC 480,
 Distinguishing Liabilities from Equity,
, and ASC
815-40, Derivatives
 Derivatives and Hedging
.Hedging. Based on the provisions governing the warrants in the applicable agreement, the Company determined that the KORE Warrants met the criteria and were required to be classified as a liability subject to the guidance in ASC
815-10
and
815-40
and should effectively be treated as outstanding common shares in both basic and diluted EPS calculations.
Public and Private Placement Warrant
Initial Measurement
—The KORE Warrants were initially measured at fair value. The estimated fair value of the warrants prior to entering into an Agreement and Plan of Merger with CTAC on March 12, 2021, was determined to be a Level 3 fair value measurement. The fair value of each KORE Warrant was approximately the fair value per share of common stock. The aforementioned warrant liabilities related to KORE Warrants are not subject to qualified hedge accounting.
Subsequent Measurement
—The KORE Warrants were converted to common stock through the Business Combination and are no longer outstanding.
Public Warrants
As part of CTAC’s initial public offering (“(the “CTAC IPO”) in 2020, CTAC issued warrants to third party investors, and each whole
warrant entitles the holder to purchase 1 share of the Company’s common stock at an exercise price of $11.50 per share (the “Public Warrants”). Simultaneously with the closing of the IPO, CTAC completed the private sale of warrants (“Private Placement Warrants”), and each Private Placement Warrant allows the holder to purchase one share of the Company’s common stock at $11.50 per share. Subsequent to the Business Combination, 8,638,966 Public Warrants and 272,778 Private Placement Warrants remained outstanding as of September 30, 2021.March 31, 2022.
24
Table of Contents
The Public Warrants may only be exercised for a whole number of common shares. The Public Warrants will become exercisable on the later of (a)
30
days after the completion of a Business Combination or (b)
12
months from the closing of the proposed public offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the common shares issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company
20
Table of Contents
permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). PerThe Company completed its public offering on September 30, 2021 and filed an effective registration statement (form
S-1)
under the Warrant Agreement, the Company has agreed that as soon as practicable, but in no event later than twenty business days after the closing of the initial Business Combination, the Company will use its commercially reasonable efforts to file with the SEC a registration statementSecurities Act covering the common shares issuable upon exercise of the warrants, and thewhich was effective on December 20, 2021. The Company will use itsplans to make commercially reasonable efforts to cause the same to become effective within
60
business days after the closing of the initial Business Combination, and to maintain the effectiveness of such registration statement and a current prospectus relating to those common shares until the warrants expire or are redeemed, as specified in the warrant agreement provided that if the common shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 
18
(b)
18(b)(1)
of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 
3
(a)
3(a)(9)
of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement. If a registration statement covering the common shares issuable upon exercise of the warrants is not effective by the
60
th day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 
3
(a)
(9)
of the Securities Act or another exemption, but the Company will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The Public Warrants will expire
five years
after the completion of the Business Combination or earlier upon redemption or liquidation.
The Company evaluated the Public Warrants for liability or equity classification in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity, and ASC
815-40,
Derivatives and Hedging. As the surviving entity following the Business Combination has a single class of shares issued and outstanding, the Public Warrants are classified as equity, with the fair value of the Public Warrants as of the date of the Business Combination closed to additional
paid-in
capital.
Initial and Subsequent Measurement—Public Warrants
The Public Warrants were initially recorded at fair value. The fair value of the Public Warrants as of September 30, 2021, based on the closing price of KORE.WS, was closed to
additional paid-in
capital and the Public Warrants will not need to be remeasured in subsequent reporting periods.
Private Placement Warrants
As part of CTAC’s IPO in 2020, CTAC completed the private sale of warrants (“Private Placement Warrants”), and each Private Placement Warrant allows the holder to purchase one share of the Company’s common stock at $11.50 per share. Subsequent to the Business Combination, 272,778 Private Placement Warrants remained outstanding as of March 31, 2022.
The Private Placement Warrants and the common shares issuable upon exercise of the Private Placement Warrants willw
ere
 not be transferable, assignable or salable until
30
days after the
completion of the initial Business Combination (except pursuant to limited exceptions to the Company’s officers and directors and other persons or entities affiliated with the initial purchasers of the Private Placement Warrants) and they will not be redeemable by the Company (except as described below under “Redemption of warrants for Class A ordinary sharessubject to certain conditions when the price per common share equals
or exceeds $
10.00
”)$10.00) so long as they are held by the Sponsor or its permitted transferees. The Sponsor, or its permitted transferees, has the option to exercise the Private Placement Warrants on a cashless basis. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrant.
The Company evaluated the Public Warrants and Private Placement Warrants for liability or equity classification in accordance with the provisions of ASC 480,
Distinguishing Liabilities from Equity,
, and ASC
815-40,
Derivatives and Hedging
.Hedging. Based on the provisions governing the warrants in the applicable agreement, the Company determined that the Private Placement Warrants met the criteria and were required to be classified as a liability subject to the guidance in ASC
815-10
and
815-40
and should effectively be treated as outstanding common shares in both basic and diluted EPS calculations. As the surviving entity following the Business Combination has a single class of shares, the Public Warrants are classified as equity, with the fair value of the Public Warrants as of the date of the Business Combination closed to additional
paid-in
capital.
25
Table of Contents
Initial MeasurementMeasurement—Private Placement Warrants
The KORE Warrants were initially measured at fair value. The estimated fair value of the warrants prior to entering into an Agreement and Plan of Merger with CTAC on March 12, 2021, was determined to be a Level 3 fair value measurement. The fair value of each KORE Warrant was approximately the fair value per share of common stock.
The aforementioned warrant liabilities related to KORE Warrants are not subject to qualified hedge accounting.
The Public and Private Placement Warrants were initially measured at fair value. The fair value of the Public Warrants as of September 30, 2021, based on the closing price of KORE.WS, was closed to additional paid-in capital. As the transfer of Private Placement Warrants to anyone outside of a small group of individuals who are permitted transferees would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant, with an insignificant adjustment for short-term marketability restrictions. As such, the Private Placement Warrants are classified as Level 2.
As of September 30, 2021,March 31, 2022, the aggregate valuesvalue of the Private Placement Warrants and Public Warrants were $
0.3 
was $0.3 million and $
8.6 
million, respectively, based on the closing price of KORE.WS on that date of $
1.00$0.95.
.
Subsequent Measure:
Measurement—Private Placement Warrants
The KORE Warrants were converted to common stock through the Business Combination and are no longer outstanding. The Private Placement Warrants are measured at fair value on a recurring basis. The Private Placement Warrants are classified as Level 2, with subsequent measurement of fair valuebasis based on the closing price of KORE.WS on the relevant date. The Public Warrants are equity classified not requiring subsequent measurement.
The change in fair value of the warrant liability for the three months ended September 30,periods ending March 31, 2022, and 2021, and September 30, 2020 was ($resulted in a gain of
2.9
)
$(0.03) million and $
0.7 
million, respectively. The change in fair value of the warrant liability for the nine months ended September 30, 2021 and September 30, 2020 was ($
5.3
) million and $
3.5 
$2.42 million, respectively.
NOTE 12 – 12—NET LOSS PER SHARE
The Company follows the
two-class
method when computing net loss per common share when shares are issued that meet the definition of participating securities. The
two-class
method requires income available to common shareholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The
two-class
method also requires losses for the period to be allocated between common and participating securities based on their respective rights if the participating security contractually participates in losses. As holders of participating securities do not have a contractual obligation to fund losses, undistributed net losses are not allocated to Series A, Series
A-1,
Series B and Series C preferred shares for purposes of the loss per share calculation. Earnings per share calculations for all periods prior to the Business Combination have been retrospectively restated to the equivalent number of shares reflecting the exchange ratio established in the merger agreement.Business Combination Agreement. Certain of pre-Combination Kore’s preferred shares ha
d
 contractual rights that allow
ed
them to receive a premium upon conversion of the preferred shares into common stock. For the
 
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three months ended March 31, 2021, the Company did 0t
incur premiums on conversion of pre-Combination Kore’s preferred shares into common shares. Refer to “Note 9—Temporary Equity and Stockholder’s Equity” to the condensed consolidated financial statements for further detail regarding the contractual rights of the Company’s preferred shares. 
Presented in the table below is a reconciliation of the numerator and d
e
nominatordenominator for the basic and diluted earnings per share (“EPS”) calculations for the periods ended:
 
   
Three months ended
September 30,
   
Nine months ended

September 30,
 
(in ‘000)
  
2021
   
2020
   
2021
   
2020
 
Numerator:
                    
Net loss attributable to the Company  $(4,508)   $(5,648)   $(12,474)   $(19,474) 
Less dividends to preferred shareholder   (7,897)    (7,139)    (22,822)    (20,492) 
Add premium on preferred conversion to common shares   4,074         
 
4,074
      
                     
Net loss attributable to common shareholders
  
$
(8,331
) 
  
$
(12,787
) 
  
$
(31,222
) 
  
$
(39,966
) 
Denominator:
                    
Weighted average common shares, basic and diluted
(in number)		   30,732,921    30,281,520    30,433,641    30,285,684 
                     
Net loss per share attributable to common shareholder, basic and diluted
  
$
(0.27
) 
  
$
(0.42
) 
  
$
(1.03
) 
  
$
(1.32
) 
                     
   
For the three months ended
 
   
March 31,
 
(in 000’ USD, except share and per share amounts)
  
2022
   
2021
 
         
Numerator:
          
Net loss attributable to the Company  $(10,907)   $(1,081) 
Less cumulative earnings to preferred shareholder   0      (7,393) 
           
Net loss attributable to common stockholders
  
 
(10,907
) 
  
 
(8,474
) 
Denominator:
          
Weighted average common shares and warrants outstanding
          
Basic (in number)   74,040,261    31,647,131 
Diluted (in number)   74,040,261    31,647,131 
Net loss per unit attributable to common stockholder
          
Basic  $(0.15)   $(0.27) 
Diluted  $(0.15)   $(0.27) 
The following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive:
 
(number of shares)
  
September 30,
2021
   
September 30,
2020
 
Series C Convertible Preferred Stock   0      2,566,186 
Stock Options   0      432,500 
   
For the three months ended
 
(Number of shares)
  
March 31,
 
   
2022
   
2021
 
         
Series C Convertible Preferred Stock   0      2,566,186 
Stock Options   0      432,500 
Common stock issued under the Backstop Agreement   9,600,031    0   
Restricted stock grants with only service conditions   3,108,277    0   
NOTE 13 – 1
3
—RELATED PARTY TRANSACTIONS
Leasing and Professional Services Agreement
KORE TM Data Brasil Processamento de Dados Ltda., a wholly owned subsidiary of the Company, maintains a lease and a professional services agreement with a company controlled by a key member of the subsidiary’s management team
.
team.
Aggregated related party transactions, which have been recorded at the exchange amount, representing the amount of consideration established and agreed by the related parties, was $0.2$0.4 and $0.1 million for the ninethree months ended September 30,March 31, 2022 and 2021, and September 30, 2020.respectively. The amount was recorded under general and administrative expenses in the consolidated statements of operations.
Due to Related Parties
Upon the closing of the Business Combination on September 30, 2021, the
Company
repaid its outstanding loans of $1.6 
million due to Interfusion B.V and T-Fone B.V., companies related though common ownership resulting from the acquisition of Aspider in 2018. The amounts outstanding at December 31, 2020 are recorded under due to related parties in the consolidated balance sheet. The amounts were as follows: 
For the period ended
(in ‘000)
  
September 30,
2021
   
December 31,
2020
 
Interfusion B.V.  $0     $985 
T-Fone
B.V.
  $0     $630 
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Interest was accrued quarterly, at a fixed rate of 2.5%. The Company accrued interest of $0.03 million for both of the nine months ended September 30, 2021 and 2020.
As of September 30, 2021, the Company accrued $1.1 million of transaction costs relating to the Business Combination to be paid to related parties under due to related parties on the consolidated balance sheet.
NOTE 14 – 1
4
—SUBSEQUENT EVENTS
The Company has completed an evaluation of all subsequent events through November
15
, 2021May 16, 2022 to ensure that these condensed consolidated financial statements include appropriate disclosure of events both recognized in the condensed consolidated financial statements and events which occurred but were not recognized in the condensed consolidated financial statements. Except as described below, the Company has concluded that no subsequent event has occurred that requires disclosure.
On October 1, 2021, KORE Group Holdings, Inc. countersigned a commitment letter (the “Commitment Letter”) pursuant to which Fortress will make additional financing available to the Company subject to certain terms and conditions, for up to $25.0
 
million of
 additional notes under the Indenture
entered into in connection with the Backstop Notes dated as of July 27, 2021 by and among KORE Wireless Group, Inc. and an affiliate of Fortress. Upon entering into definitive documentation, the Sponsor has agreed to contribute 100,000 shares of common stock of the Company to LLC Merger Sub, which shares will be transferred by LLC Merger Sub to Fortress, as a commitment fee, pursuant to the terms and upon the
conditions set forth in the Commitment Letter. The Company executed the Exchangeable Notes Purchase Agreement on October 28, 2021, issuing $24.9 million in additional
exchangeable notes
.
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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
KORE’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results of operations of KORE Group Holdings, Inc. should be read together with our audited consolidated financial statements as of December 31, 2021, and 2020 and for the years ended December 31, 2021, 2020 and 2019 and unaudited interim condensed consolidated financial statements as of and for the three months and nine months ended September 30, 2021 and September 30, 2020, together with related notes thereto.2019. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those projected in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors.”Factors”. Unless the context otherwise requires, all references in this section to “the Company” “KORE,” “us,” “our” or “we” refer to Maple Holdings, Inc. prior to the Business Combination, and to KORE Group Holding,Holdings, Inc. following the consummation of the Business Combination on September 30, 2021.
Overview
KORE Group Holdings, Inc. is the parent entity of KORE Wireless Group, Inc., its wholly owned and principal operating subsidiary. KORE Wireless’Both entities are incorporated in Delaware. Our corporate headquarters are located in Alpharetta, GeorgiaAtlanta, Georgia.
KORE simplifies IoT adoption by putting more intelligence into our software and incorporated in Delaware.platforms. Our technology stack enables our customers with an easy way to assemble and configure the ‘IoT Building Blocks’ they need to deploy their End Solutions. IoT Building Blocks enable the data journey from the Edge Device to the customer Application, hence driving the solutions and outcomes our customers desire.
KORE is one of the largest global independent IoT companies enabling mission-critical CaaS, or “IoT Connectivity” for reporting purposes, IoT solutionsSolutions and Analytics (or simply “IoT Solutions” for reporting purposes) to enterprise customers across five key industry verticals, comprising (i) Connected Health, (ii) Fleet Management, (iii) Asset Monitoring, (iv) Communications Services and (v) Industrial IoT (or “
IIoT
”“IIoT”).
Example customer use cases across our five key verticals are illustrated below:
 
Connected HealthHealth:
: Remote patient monitoring and telemedicine enabled by connected medical devices, IoT device enabled clinical drug trials, mPERS connected emergency devices, connected medical equipment diagnostics, electronic visit verification.
 
Fleet ManagementManagement:
: Stolen vehicle recovery location tracking, connected cameras for tracking vehicle driving conditions and driver behaviour,behavior, connected route optimization, fuel consumption optimization, connected preventive maintenance, usage-based insurance, connected cars.
 
Asset MonitoringMonitoring:
: Home/business security sensor and camera solutions, offender tracking through ankle bracelets, tank monitoring, supply chain inventory and asset tracking, fuel pipeline flow monitoring.
 
Communication ServicesServices:
: IoT and consumer service providers, carrier IoT business units, enterprise connectivity / failsafe, private networking — networking—we may provide Connectivity Enablement as a Service for some of these customers.
 
Industrial IoTIoT:
: Smart utilities / meters, smart cities / buildings, smart factories, field service automation, manufacturers of smart or connected products Providingproviding global connectivity to devices across the globe, over different networks and protocols is a highly complex undertaking.
KORE’s portfolio of IoT connectivity services capabilities, proprietary technology and IP stack, combined with its vast network of 44 carrier integrations globally enables the Company to be a market leader in working with enterprise customers. Apart from basic IoT connectivity services, we also provide connectivity enablement services to enable other service providers to provide IoT connectivity.
Successful deployment of IoT solutionsSolutions is extremely complex; notably, some of the significant challenges in IoT deployment include:
 
Lack of readily
available
in-house
IoT resources and expertiseexpertise;
 
Significant time required to get to marketmarket;
 
High failure rate of IoT initiatives
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A highly fragmented vendor landscapeinitiatives;
 
EcosystemA highly fragmented vendor landscape;
An ecosystem that is quickly evolving and changing rapidlyrapidly;
 
Substantial and increasing regulatory/compliance issuesissues;
 
Interoperability and compatibility with assorted technologiestechnologies.
Starting with the hiring
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Table of the current management team in late 2017 andContents
Through early 2018, KORE has been executing a multi-year strategic transformation program to transform from a ‘connectivity only’ player to a market leading, global enabler of IoT providing IoT Connectivity, IoT Solutions and Analytics. The elements of this transformation program are building the core technology platform of the future ‘KORE One’One
™
’, building IoT Solutions products and a strategic repositioning of the companyCompany in the market including strategic M&A. This multi-year strategic transformation program is expected to be complete by end of 2022.2023. As a result of this transformation program:
 
We believe KORE One is now an industry leading platform for IoT subscription and network management, and which provides us with a competitive edge in the market.
 
Amongst industry analysts, KORE has continued to establish and improve its position as the only pure play IoT enabler. Recognized in 2019 by Gartner asKORE was the only independent serviceIoT Connectivity provider to be namedrecognized as a “Leader”leader in the Magic Quadrant for Managed IoT Connectivity Services, KORE continued its upward momentumby Gartner in 2020the 2022 Magic Quadrant report for the third year in a row. The Company was also listed as it improved upon its position to be ranked amonga leader by IDC MarketScape, highlighting the top global services providers within the same category.breadth and scale of KORE’s solutions.
 
KORE’s product portfolio has expanded significantly. A few years ago KORE was primarily IoT Connectivity Services focused while today its product portfolio includes IoT Solutions such as IoT Deployment Services and Security Software and Services. KORE’s IoT Connectivity Services have also become richer through the addition of the eSIMs and “Connectivity Enablement as a Service” to the IoT Connectivity Services product portfolio.
 
IoT Solutions has increased as a proportion of KORE’s total revenue each year since 2018. In the ninethree months ended SeptemberMarch 31, 2022, and March 31, 2021, respectively, IoT Solutions represented 32%36% and 26% of KORE’s total revenue while in the nine months ended September 30, 2019, IoT Solutions represented 26% of revenue.
KORE’s IoT and analytics solutions include IoT device management services, IoT location-based services software, and IoT device security services software for the
Machine-to-Machine
market.
Customers of KORE’s products include fleet owners and transportation companies, fleet management software providers, healthcare companies including healthcare device manufacturers, healthcare payors and healthcare contract research organizations, telecommunications service providers, manufacturers and industrial automation providers, application service providers and enterprises in various other industries, including consumer electronic devices, retail, home and office security and safety etc. KORE’s largest customers include Fortune 500 enterprises and innovative solution providers across multiple high growth vertical markets.
KORE’s products compete with a variety of solutions, including other Subscription-based IoT platforms and solutions. Our current competitors include:
 
For IoT ConnectivityConnectivity—
- telecom carriers such as
T-Mobile
and Vodafone; Mobile Virtual Network Operators such as Aeris and Wireless Logic; and
 
For IoT Solutions and Analytics
- —device management services providers such as Velocitor and Futura, fleet management SaaS providers such as Fleetmatics and GPS Trakit, and analytics services providers such as Galooli and Intellisite. KORE has made several key acquisitions that have enhanced solutions to new and existing customers. Most recently, in November 2019, KORE completed the acquisition of Integron LLC, purchasing all of the outstanding share capital of lntegron LLC in exchange for cash and equity (the “Integron Acquisition”). The Integron Acquisition further enhances KORE’s strategic position as the global leader in enabling powerful healthcare IoT solutions for the largest global organizations.
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Trends Affecting Our Business
All of the markets in which we operate are characterized by rapid technological change, frequent introductions of new products, services and solutions and evolving customer demands. We expect our market to be competitive especially with the focus on IoT with the development and deployment of 5G technologies. In addition, we are affected by changes in the many industries related to the products or services we offer, including the fleet management, connected biomedical devices and home security industries. As the technologies used in each of these industries evolves, we will face new integration and competition challenges.
Our ability to expand our business through new solutions and penetration into new sectors
The success of our business depends, in part, on our ability to maintain and protect our proprietary technologies, information, processes and
know-how.
We rely primarily on trademark, copyright, trade secret and other intellectual property laws in the U.S. and similar laws in other countries, confidentiality agreements and procedures and other contractual arrangements to protect our technology. The growing number of IoT, eSIM and 5G use cases presents opportunity for us to deliver critical solutions in these rapidly growing industries. We expect that product offerings such as the highly scalable KORE One platform and the growth of eSIMs will position us for growth in the connectivity market.
Our growth strategy consists of the following:
 
Organic volume growth – growth—leveraging the strong IoT industry growth expressed in terms of our customers’ revenue, device and data usage growth, while continuing to maintain high customer retention
 
Cross-sell and upsell – upsell—selling KORE’s growing portfolio of IoT solutionsSolutions developed during the prior two years and going-forward, to our large base of connectivity services only customers
 
Deepening our presence in focusfocused industry sector – sectors—developing more of a vertical orientation in our business and deepening industry domain knowledge that will in turn allow the development and deployment of
pre-configured
industry solutions
 
Enhancing AIoT (Artificial Intelligence + IoT) and Edge Analytics capabilities
 
Strategic acquisitions that will allow KORE to expand our IoT solutionsSolutions and advanced IoT connectivity capabilities while ensuring a highly disciplined use of capital for such acquisitions
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We operate in a highly competitive market
The market for KORE’s products and solutions is rapidly evolving and highly competitive. It is likely to continue to be affected by new product introductions and industry participants. The unique expertise required to design its product offerings and customers’ reluctance to try unproven products has confined the number of competing firms to a relatively small number.
KORE competes in the IoT connectivity market on the basis of the following factors:
 
The number of carrier integrations (44)
 
KORE One platform (7 engines)
 
ConnectivityPro service and related APIs
 
eSIM technology stack/ proprietary IP
 
Hypercore technology
KORE competes in the IoT Solutions market on the basis of the following factors:
 
Deep industry vertical knowledge and experience (
e.g.
, in Connected Health through FDA, HIPAA, ISO 9001/13485 compliance)
 
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Breadth of solutions and analytics services
 
3,400+3,000+ connectivity-only customers for cross-sell opportunities
While the abovementioned factors provide KORE with certain competitive advantages, KORE’s market is highly competitive, and we expect it to continue to be so especially with the greater focus on the IoT market withthrough the development and deployment of 5G technologies.
Impact of transitions of IoT connections from 2G/3G to LTE
In the United States, the major carriers have announced intentions to phase out their 2G and 3G networks by the end of 2022.
2022 which will result in carriers migrating customers onto LTE platforms. While we expect customers to experience increased customer satisfaction from the migration onto superior LTE platforms, the rate plans under these platforms are typically lower in price than legacy 2G and 3G rate plans. As a result, the phase out of 2G and 3G may result in lower revenue per unit and/or lower revenue to KORE. While KORE has strong relationships with many of the affected customers and expects to retain most of the connections which will not be retired on 4G or 5G technologies, some of these connections may be lost as a result of competitive bidding processes. The projected impact of this is incorporated in KORE’s projections.
Business Combination
On March 12, 2021, KOREKing Pubco, Inc. (“Pubco”) entered into a definitive merger agreement with CTAC,Cerberus Telecom Acquisition Corp. (“CTAC”), a special purpose acquisition company affiliated with Cerberus Capital Management, L.P. On September 30, 2021, as contemplated by the MergerBusiness Combination Agreement, (i) CTAC merged with and into LLC Merger Sub (the “Pubco Merger”), with LLC Merger Sub being the surviving entity of the Pubco Merger and Pubco as parent of the surviving entity, (ii) immediately prior to the First Merger (as defined below), Cerberus Telecom Acquisition Holdings, LLC (the “Sponsor”) contributed 100% of its equity interests in Corp Merger Sub to Pubco (the “Corp Merger Sub Contribution”), as a result of which Corp Merger Sub became a wholly owned subsidiary of Pubco, (iii) following the Corp Merger Sub Contribution, Corp Merger Sub merged with and into KORE (the “First Merger”), with KORE being the surviving corporation of the First Merger, and (iv) immediately following the First Merger and as part of the same overall transaction as the First Merger, KORE merged with and into LLC Merger Sub (the “Second Merger” and, together with the First Merger, being collectively referred to as the “Mergers” and, together with the other transactions contemplated by the Merger Agreement, the “Transactions” and the closing (the “Closing”) of the Transactions, the “Business Combination”), with LLC Merger Sub being the surviving entity of the Second Merger and Pubco being the sole member of LLC Merger Sub. In connection with the Business Combination, Pubco changed its name to “KORE Group Holdings, Inc.”
The most significant change in the post-combination Company’s reported financial position and result was an increase in cash of $63.2 million. We paid $19.0 million in transaction costs relating to the Business Combination at the closing. As of September 30, 2021, the Company had accrued $3.0 million of transaction costs to be paid after the Closing, including $1.1 million of transaction costs due to related parties.
As a consequence ofFollowing the Business Combination, the Company trades under the ticker symbol “KORE” on the NYSE. We anticipate that we will need to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.
 
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COVID-19
In March 2020, the World Health Organization declared the outbreak of the
COVID-19
a global pandemic, which has resulted in significant disruption and uncertainty in the global economic markets, and which in turn has impacted our business.business as well as most other businesses. Given the amount of uncertainty currently regarding the scope and duration of the
COVID-19
pandemic, we are currently unable to predict the precise impact thethat
COVID-19
pandemic will have on our business, financial condition and results of operations. However, we may be exposed tooperations in the future. As of the date of this filing, the Company has experienced certain negative impacts from the pandemic; for example we had one major customer andpandemic, such as the loss of multiple smaller customers experiencethat experienced financial distress, resulting in payment delays in payments and a reduction in revenue withfrom those customers. However,Overall, as of the impactdate of thethis filing,
COVID-19
pandemic to our businesshas not had a significant negative impact on the Company’s results of operations, as a whole is uncertain, and bad debt expense decreasedevidenced by factors such as continued revenue growth for the ninethree months ended September 30, 2021March 31, 2022 as compared to the ninethree months ended September 30, 2020.March 31, 2021.
We believe
COVID-19’s
continued impact on our business, financial condition and results of operations will be significantly driven by a number of factors that we are unable to predict or control, including, for example: the severity and duration of the pandemic, including the timing of availability of a treatment or vaccine for
COVID-19;
the pandemic’s impact on the U.S. and global economies; the timing, scope and effectiveness of additional governmental responses to the pandemic; the timing and path of economic recovery; and the negative impact on our clients, counterparties, vendors and other business partners that may indirectly adversely affect us.
Operating Segments
We have determined that we operate in a single operating and reportable segment, consistent with how our chief operating decision maker (“CODM”) allocates resources and assesses performance.
Components of Results of Operations
Revenue
We derive revenue from:
-Services:
Services: IoT Connectivity services and IoT Solutions services.
-Product sales:
Products: SIMs (IoT Connectivity) and IoT devices (IoT Solutions).
KORE views our business as being constituted of two services lines: IoT Connectivity and IoT Solutions.
The fees for IoT Connectivity generally consist of a monthly platform subscription fee and additional data usage fees that are part of a bundled solution which enable other Providers and Enterprise customers to complete their platform for solutions to provide IoT Connectivity. IoT Connectivity also includes charges for each subscriber identity modules (SIMs) sold to a customer.
In IoT Solutions, we derive revenue from IoT device management services, location-based software services and IoT security software services. Fees charged for device management services includesinclude the cost of the underlying IoT device and the cost of deploying and managing such devices and is usuallydevices. Fees charged for device management services are generally billed on a fee per deployed IoT device basis which such fee depends on the scope of the underlying services and the IoT device being deployed. Location based software services and IoT security software services are charged on
a per subscriber per-subscriber
basis.
Costs and Expenses
Cost of Revenue
Cost of revenue consists primarily of costs associated with IoT connectivityConnectivity and those associated with IoT Solutions. IoT Connectivity costs include carrier costs, network operations, technology licenses, and other costs such as shipping a SIM. IoT Solution costs include the cost of devices, shipping costs, warehouse lease and related facilities expenses, and personnel costs. Total cost of revenue excludes depreciation and amortization.
 
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Operating expenses
We incur expenses associated with sales, marketing, customer support, and administrative activities related to the operation of our business, includingwhich are generally included as part of selling, general and administrative expenses. We also incur significant charges for depreciation and amortization of our intangible assets and other acquired intellectual property and(including intangible assets we acquired or developed.developed), other acquired intellectual property, as well as our fixed assets which support the deployment of our IoT Connectivity services and IoT Solutions services. We also incur engineering expenses developing and supporting the operation of our communications systemsystems and the early stage engineering work on new products and services that are not yet determined to be technologically feasible.
Key Metrics
KORE reviews a number of metrics to measure our performance, identify trends affecting our business, prepare financial projections, and make strategic decisions. The calculation of the key metrics and other measures discussed below may differ from other similarly titled metrics used by other companies, securities analysts, or investors.
Number of Connections
Total Connections constitutes the total of all KORE IoT Connectivity services connections, including both CaaS and CEaaS connections, but excluding certain connections where mobile carriers license KORE’s subscription management platform from KORE.
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Total Connections include the contribution of eSIMs and is the principal measure used by management to assess the performance of the business on a periodic basis.
DBNER
DBNER (Dollar Based Net Expansion Rate) tracks the combined effect of cross-sales of IoT Solutions to KORE’s existing customers, its customer retention and the growth of its existing business. KORE calculates DBNER by dividing the revenue for a given period (“given period”) from
existing
go-forward customers
customers by the revenue from the same customers for the same period measured one year prior (“base period”).
The revenue included in the current period excludes revenue from (i) customers that are non
go-forward
customers, meaning customers that have either communicated to KORE before the last day of the current period their intention not to provide future business to KORE or customers that KORE has determined are transitioning away from KORE based on a sustained multi-year time period of declines in revenue and (ii) new customers that started generating revenue after the end of the base period. For example, to calculate our DBNER for the trailing 12 months ended September 30, 2021,March 31, 2022, we divide (i) revenue, for the trailing 12 months ended September 30, 2021,March 31, 2022, from
go-forward
customers that started generating revenue on or before September 30, 2020March 31, 2021 by (ii) revenue, for the trailing 12 months ended September 30, 2020,March 31, 2021, from the same cohort of customers. For the purposes of calculating DBNER, if KORE acquires a company during the given period or the base period, then the revenue of a customer before the acquisition but during either the given period or the base period is included in the calculation. Further, it is often difficult to ascertain which customers should be deemed not to be
go-forward
customers for purposes of calculating DBNER. Customers are not required to give notice of their intention to transition off of the KORE platform, and as discussed above in “Information about KORE—CustomerKORE-Customer and Key Partners”, a customer’s exit from the KORE platform can take months or longer, and total connections of any particular customer can at any time increase or decrease for any number of reasons, including pricing, customer satisfaction or product fit – fit—accordingly, a decrease in total connections may not indicate that a customer is intending to exit the KORE platform, particularly if that decrease is not sustained over a period of several quarters. DBNER would be lower if it were calculated using revenue from non
go-forward
customers.
As of September 30, 2021 and 2020, DBNER excludes approximately 0.6 million and 1.0 million connections, respectively, from non
go-forward
customers, in each case, the vast majority of which are connections from
Non-Core
Customers.
KORE defines
“Non-Core
Customers” to be customers that management has judged to be lost as a result of the integration of Raco, Wyless and other acquisitions completed during in the 2014-2017 period, but which continue to have some connections (and account for some revenue) each year with KORE.
Non-Core
Customers are a subset of non
go-forward
customers.
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DBNER is used by management as a measure of growth at KORE’s existing customers (i.e., “same store” growth). It is not intended to capture the effect of either new customer wins or the declines from non
go-forward
customers on KORE’s total revenue growth. This is because DBNER excludes new customers which started generating revenue after the base period, and also excludes any customers which are non
go-forward
customers on the last day of the current period. Revenue increases from new customer wins, and a decline in revenue from non
go-forward
customers are also important factors in assessing KORE’s revenue growth, but these factors are independent of DBNER.
Results of Operations for the Three ended March 31, 2022, and Nine Months ended September 30, 2021 and 2020
Revenue
The table below presents our revenue for the three and nine months ended September 30,March 31, 2022 and 2021, and 2020,respectively, together with the percentage of total revenue represented by each revenue category:
 
  
For three months ended
September 30,
 
For nine months ended
September 30,
   
Three months ended March 31,
 
Change March 31, 2022
 
(in ‘000)
  
2021
 
2020
 
2021
 
2020
 
(in ‘000 USD)
  
2022
 
2021
 
$
   % 
Services
  $48,428    71%  $43,436    79%  $139,866    76%  $127,113    81%   $47,506    69%  $45,062    81%  $2,444    5% 
Products
   19,450    29%   11,821    21%   44,053    24%   29,184    19%    21,435    31%   10,235    19%   11,200    109% 
  
 
   
 
  
 
   
 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
  
 
   
Total revenue
  
$
67,878
 
  
 
100
% 
 
$
55,257
 
  
 
100
% 
 
$
183,919
 
  
 
100
% 
 
$
156,297
 
  
 
100
% 
Total Revenue
  
$
68,941
 
  
 
100
% 
 
$
55,297
 
  
 
100
% 
 
$
13,644
 
  
 
25
% 
  
 
   
 
  
 
   
 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
  
 
   
Total revenue for the three months ended September 30, 2021March 31, 2022, increased by $12.6$13.6 million, or 23%25%, to $67.9$68.9 million from $55.3 million for the three months ended September 30, 2020. March 31, 2021.
Services revenue growth
of $5.0$2.4 million was driven by the growth in IoT Connectivity services revenue of $2.3$3.4 million and an increase inwhich was partially offset by the decline of IoT Solutions serviceservices revenue of $2.7 million due to an increase in product deployments by KORE related to its IoT Solutions.$1.0 million. IoT Connectivity services revenue growth of $2.3$1.1 million was driven by the organic growth of our existing IoT customers of $4.3$3.6 million and newas well as $1.0 million from newly acquired customers, acquired of $0.5 million,including customers from the BMP acquisition. These increases were offset partially by a decrease of $1.5$0.8 million in revenue from
Non-Core
Customers (customers lost from integration of old acquisitions
in
2014-17) and
and the migration of customers from 2G and 3G technologies to LTE (“Long Term Evolution”) cellular technologies involving
a
one-time adjustment
adjustment in price estimated at $1.0$0.5 million. ProductServices revenue growth of $7.6$2.4 million was driven primarily by an increase in the number of devices deployed by KORE related to its IoT Solutions.
Total revenue for the nine months ended September 30, 2021 increased by $27.6 million, or 18%, to $183.9 million from $156.3 million for the nine months ended September 30, 2020. Service revenue growth of $12.7 million was driven by the growth in IoT Connectivity services revenue of $9.9 million, and an increase in IoT Solutions service revenue of $2.8 million due to an increase in product deployments by KORE related to its IoT Solutions. IoT Connectivity services revenueThis growth of $9.9 million was driven by the organic growth of our existing IoT customers of $16.3 millionlargest customer and new customers acquired of $0.8 million. These increases were offset partially by a decrease of $4.7 million in revenue fromtheir LTE transition project.
Non-Core
Customers (customers lost from integration of old acquisitions in
2014-17)
and the Long Term Evolution cellular technologies involving a
one-time
adjustment in price estimated at $2.5 million. ProductProducts revenue growth
of $14.9$11.2 million was driven primarily by an increase in the number of devices deployed by KORE related to its IoT Solutions. Within product revenue, there was a $7.3$4.2 million increase driven by our largest customer and their additional
one-time
volumes related to transitions from 2G and 3G technologies.LTE transition project.
 
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The table below presents how management views our revenue for the three and nine months ended September 30,March 31, 2022 and 2021, and 2020respectively together with the percentage of total revenue represented by each revenue category:
(in ‘000)
   
Three months ended March 31,
  
Change March 31, 2022
 
(in ‘000 USD)
  
2022
  
2021
  
$
   
%
 
IoT Connectivity
  $44,098    64%  $40,720    74%  $3,378    8% 
IoT Solutions
   24,843    36%   14,577    26%   10,266    70% 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
Total Revenue
  
$
68,941
 
  
 
100
% 
 
$
55,297
 
  
 
100
% 
 
$
13,644
 
  
 
25
% 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
   
For three months ended
September 30,
  
For nine months ended
September 30,
 
   
2021
  
2020
  
2021
  
2020
 
IoT Connectivity
  $41,542    61%  $39,604    72%  $125,590    68%  $115,180    74% 
IoT Solutions
   26,336    39%   15,653    28%   58,329    32%   41,117    26% 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
Total revenue
  
$
67,878
 
  
 
100
% 
 
$
55,257
 
  
 
100
% 
 
$
183,919
 
  
 
100
% 
 
$
156,297
 
  
 
100
% 
Period End Connections Count
   13.6 million   11.0 million   13.6 million   11.0 million 
Average Connections Count for the Period
   13.5 million   10.8 million   13.1 million   10.2 million 
   
For three months ended March 31,
 
   
2022
   
2021
 
Period End Connections
  
 
15.3 million
 
  
 
12.9 million
 
Average Connections Count for the Period
  
 
15.1 million
 
  
 
12.7 million
 
Total revenue for the three months ended September 30, 2021March 31, 2022, increased by $12.6$13.6 million, or 23%25%, to $67.9$68.9 million from $55.3 million for the three months ended September 30, 2020. Overall March 31, 2021.
IoT Connectivity growth
 of $1.9$3.4 million, which includes SIM revenue, was driven by the organic growth of our existing IoT customers of $3.9$3.6 million and newas well as $1.0 million from newly acquired customers, acquired of $0.5 million.including customers from the BMP acquisition. These increases were partially offset partially by $0.8 million from
Non-Core
Customers (customers lost from the integration of old acquisitions
in
2014-17)
by $1.5 millionas well as the migration of customers from 2G and the Long Term Evolution3G technologies to LTE cellular technologies involving which resulted in
a
one-time
adjustment in price estimated at $1.0$0.5 million. KORE grew its total number of connections from 11.0 million on September 30, 2020 to 13.6 million on September 30, 2021, mostly at existing customers, which resulted in the growth of KORE IoT Connectivity revenue in the three months ended September 30, 2021 with respect to the three months ended September 30, 2020. IoT Solutions growth of $10.7 million was driven by the organic growth of our Connected Health IoT Solutions. Notably, new IoT Connectivity customer relationships usually start small and often expand significantly in the first three to four years of the relationship.
Total revenue for the nine months ended September 30, 2021 increased by $27.6 million, or 18%, to $183.9 million from $156.3 million for the nine months ended September 30, 2020. Overall IoT Connectivity growth of $10.4 million, which includes SIM revenue, was driven by the organic growth of our existing IoT customers of $16.8 million and new customers acquired of $0.8 million. These increases were offset partially by
Non-Core
Customers (customers lost from the integration of old acquisitions in
2014-17)
by $4.8 million and the Long Term Evolution cellular technologies involving a
one-time
adjustment in price estimated at $2.5 million. IoT Solutions growth of $17.2 million was driven by the organic growth of our Connected Health IoT Solutions. Notably,most new IoT Connectivity customers relationships usually start small and often expand significantly in the first three12 to four years of24 months, depending on the relationship. device requiring connectivity in the use case.
KORE grew its total number of connections from 11.012.9 million on September 30, 2020March 31, 2021, to 13.615.3 million on September 30, 2021,March 31, 2022, mostly atas a result of additional connections from existing customers, which resulted in the growth of KORE IoT Connectivity revenue in the nine monthsperiod ended September 30, 2021March 31, 2022 with respect to the nine monthsperiod ended September 30, 2020.March 31, 2021.
IoT Solutions growth
 of $10.3 million was mainly driven by the organic and inorganic growth of our Connected Health IoT Solutions. $4.4 million of the IoT Solutions growth was due the LTE transitions project with our largest customer.
Within IoT Solutions, there was an increase in devices deployed and provided by KORE to its IoT Solutions customers, and a proportionate increase in IoT deployment services revenue associated with each device shipped. Directionally, we expect the growth in IoT Solutions to continue to be driven primarily by an increase in device deployments although actual deployment volumes may vary from quarter to quarter.
For the twelvethree months ended September 30, 2021,March 31, 2022, KORE’s DBNER was 114%122% compared to 103%108% in the twelvethree months ended September 30, 2020.March 31, 2021.
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Table of Contents
Costs of revenue, exclusive of depreciation and amortization
 
  
For three months ended
 
For nine months ended
   
Three months ended March 31,
 
Change March 31, 2022
 
  
September 30,
   
Change
 
September 30,
   
Change
 
(in ‘000)
  
2021
   
2020
   
Dollars
   
%
 
2021
   
2020
   
Dollars
   
%
 
(in ‘000 USD)
  
2022
 
2021
 
$
   
%
 
Cost of services
  $17,379   $15,675    1,704    11%  $51,417   $47,594    3,823    8%   $17,529    50%  $16,211    67%  $1,318    8% 
Cost of products
   17,585    9,853    7,732    78%   37,258    22,921    14,337    63%    17,443    50%   8,161    33%   9,282    114% 
  
 
   
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
   
 
  
 
   
 
  
 
   
Total cost of revenue
  
$
34,964
 
  
$
25,528
 
  
$
9,436
 
  
 
37
% 
 
$
88,675
 
  
$
70,515
 
  
 
18,160
 
  
 
26
% 
  
$
34,972
 
  
 
100
% 
 
$
24,372
 
  
 
100
% 
 
$
10,600
 
  
 
43
% 
  
 
   
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
   
 
  
 
   
 
  
 
   
   
For three months ended March 31,
 
Gross margin rate
  
2022
  
2021
 
Cost of services
   63%   64% 
Cost of products
   19%   20% 
Total gross margins
   49%   56% 
Total cost of revenue for the three months ended September 30, 2021March 31, 2022, increased $9.4$10.6 million, or 37%43%, to $35.0 million from $25.5$24.4 million for the three months ended September 30, 2020.March 31, 2021.
Cost of services
 increased by $1.3 million for the three-month period ended March 31, 2022, compared to the three-month period ended March 31, 2021. The $1.7 million increase in the cost of services for the three months ended September 30, 2021, compared to the three months ended September 30, 2020, was primarily driven by increased carrier costs associated withresulting from the growth in IoT Connectivity revenue. The $7.7 million increase
28
Table of Contents
During the three-month period ended March 31, 2022, the gross margin percentage of our services business was flat compared to the same period in costfiscal 2021.
Cost of products
increased $9.3 million for the three monthsperiod ended September 30, 2021, fromMarch 31, 2022, compared to the three months ended September 30, 2020,same period in fiscal 2021. The increase was primarily driven by the increaseincreases in the cost of devices associated with the growth in IoT Solutions. Notably, in the three monthsthree-month period ended September 30, 2021,March 31, 2022, there was an increase in devices deployed by KORE to its Connected Health IoT Solutions customers.
Total cost of revenue for Additionally, increased shipping costs during the nine monthsthree-month period ended September 30, 2021 increased $18.2 million, or 26%, to $88.7 million from $70.5 million for the nine months ended September 30, 2020. The $3.8 million increase in the cost of services for the nine months ended September 30, 2021,March 31, 2022, as compared to the nine months ended September 30, 2020, was driven by increased carrier costs associated with the growthsame period in IoT Connectivity revenue offset by the $1.1 million settlement of a disputed amount owed to a Carrier from 2020. The $14.3 million increase in cost of products for the nine months ended September 30,fiscal 2021 from the nine months ended September 30, 2020, was primarily driven bycontributed the increase in the cost of devicesproducts.
During three-month period ended March 31, 2022, the gross margin percentage of our products business declined as compared to the same period in fiscal 2021. The decline was mainly due to the large volumes associated with our largest customer’s LTE transition project. To win the growthlarge volumes associated with this project,
additional one-time project-specific
discounts were given, which contributed significantly to the decline in IoT Solutions. Notably,gross margins on products. Additionally, increased shipping costs during the three-month period ended March 31, 2022, as compared to the same period in the nine months ended September 30,fiscal 2021 there was an increase in devices deployed by KORE to its Connected Health IoT Solutions customers.
also pressured gross margin percentage on products.
The table below presents how management views our costs of revenue for the threethree-month periods ended March 31, 2022, and nine months ended September 30, 2021, and 2020,respectively, exclusive of depreciation and amortization:
 
  
For three months ended
 
For nine months ended
   
Three months ended March 31,
 
Change March 31, 2022
 
  
September 30,
   
Change
 
September 30,
   
Change
 
(in ‘000)
  
2021
   
2020
   
Dollars
   
%
 
2021
   
2020
   
Dollars
   
%
 
(in ‘000 USD)
  
2022
 
2021
 
$
   % 
Cost of IoT Connectivity
  $16,111   $15,475    636    4%  $48,729   $45,975    2,754    6%   $16,870    48%  $15,332    63%  $1,538    10% 
Cost of IoT Solutions
   18,853    10,053    8,800    88%   39,946    24,540    15,406    63%    18,102    52%   9,040    37%   9,062    100% 
  
 
   
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
   
 
  
 
   
 
  
 
   
Total cost of revenue
  
$
34,964
 
  
$
25,528
 
  
 
9,436
 
  
 
37
% 
 
$
88,675
 
  
$
70,515
 
  
 
18,160
 
  
 
26
% 
  
$
34,972
 
  
 
100
% 
 
$
24,372
 
  
 
100
% 
 
$
10,600
 
  
 
43
% 
  
 
   
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
   
 
  
 
   
 
  
 
   
   
Three months ended March 31,
 
Gross margin rate
  
2022
  
2021
 
IoT Connectivity
   62%   62% 
IoT Solutions
   27%   38% 
Total gross margins
   49%   56% 
Total cost of revenue for the three months ended September 30, 2021March 31, 2022, increased $9.4$10.6 million, or 37%43%, to $35.0 million from $25.5$24.4 million for the three months ended September 30, 2020. The $0.6 million increase in costMarch 31, 2021.
Cost of IoT Connectivity
increased by $1.5 million for the three monthsthree-month period ended September 30, 2021,March 31, 2022, compared to the three months ended September 30, 2020,same period in fiscal 2021. This was driven by increased carrier costs associated with the growth in IoT Connectivity revenue. The $8.8 million increase
During the three-month period ended March 31, 2022, the gross margin percentage of our IoT Connectivity business was flat compared to the same period in costfiscal 2021.
Cost of IoT Solutions
increased by $9.1 million for the three monthsthree-month period ended September 30, 2021,March 31, 2022, compared to the three months ended September 30, 2020,same period in fiscal 2021. This was primarily driven by the increased cost of devices and labor associated with the volume growth in IoT Solutions. Notably, in the three months ending September 30, 2021,three-month period ended March 31, 2022, there was an increase in devices provided and shipped by KORE to its Connected Health IoT Solutions customers. This resulted in an increase in the cost of devices provided and shipped, and a proportionate increase in IoT deployment and device management services revenue associated with each device shipped which also resulted in an increase in the labor and other costs of providing such IoT deployment and device management services.
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Table of Contents
Total cost of revenue forIn the nine monthsthree-month period ended September 30, 2021 increased $18.2 million, or 26%, to $88.7 million from $70.5 million forMarch 31, 2022, the nine months ended September 30, 2020. The $2.8 million increase in costgross margin percentage of IoT Connectivity for the nine months ended September 30, 2021,Solutions declined as compared to the nine months ended September 30, 2020,same period last year. The decline was driven by increased carrier costsmainly due to the large volumes associated with our largest customer’s LTE transition project. To win the growthlarge volumes associated with this project, additional
one-time
project-specific discounts were given, which contributed significantly to the decline in gross margins on IoT Connectivity revenue offset by a $1.1 million settlement of a disputed amount owed to a Carrier from 2020. The $15.4 million increaseSolutions. Additionally, market-wide increases in cost of IoT Solutions forshipping and labor costs in the nine monthsthree-month period ended September 30, 2021,March 31, 2022, as compared to the nine months ended September 30, 2020, was primarily driven bysame period in fiscal 2021 also pressured the increased cost of devices and labor associated with the volume growth ingross margins on IoT Solutions. Notably, in the nine months ending September 30, 2021, there was an increase in devices provided and shipped by KORE to its IoT Solutions customers. This resulted in an increase in the cost of devices provided and shipped, and a proportionate increase in IoT deployment and device management services revenue associated with each device shipped which also resulted in an increase in the labor and other costs of providing such IoT deployment and device management services.
Selling, general and administrative expenses
 
   
For three months ended
  
For nine months ended
 
   
September 30,
   
Change
  
September 30
   
Change
 
(in ‘000)
  
2021
   
2020
   
Dollars
   
%
  
2021
   
2020
   
Dollars
   
%
 
Selling, general and administrative expenses
  $26,001   $17,792    8,209    46%  $66,525   $49,907    16,618    33% 
   
Three months ended March 31,
   
Change
 
(in ‘000 USD)
  
2022
   
2021
   
$
   
%
 
Selling, general, and administrative
  $27,628   $17,521   $10,107    58% 
 
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Table of Contents
Selling, general and administrative (SG&A)(“SG&A”) expenses relate primarily to expenses for general management, sales and marketing, finance, audit and legal fees and general operating expenses. The increase in SG&A expenses for the three monthsthree-month period ended September 30, 2021,March 31, 2022, compared to the three monthsthree-month period ended September 30, 2020,March 31, 2021, was primarily due to costs associated with being a public company of $3.3 million, an increased foreign currency lossincrease in stock compensation expense of $0.4$1.7 million, costs in connection with the BMP Acquisition of approximately $1.7 million, and an increase in salary and benefit related items of $6.0 million and costs associated with going public of $1.4 million. All other items, which includes marketing, travel, information technology and facilities related items increased $1.2 million. The increase in SG&A expenses for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, was primarily due to a decreased foreign currency gain of $1.1 million, an increase in salary and benefit related items of $9.7 million and costs associated with going public of $4.5 million. All other items, which includes marketing, travel, information technology and facilities related items increased $1.3$2.0 million.
Depreciation and amortization
 
  
For three months ended
 
For nine months ended
   
Three months ended March 31,
   
Change
 
  
September 30,
   
Change
 
September 30,
   
Change
 
(in ‘000)
  
2021
   
2020
   
Dollars
 
%
 
2021
   
2020
   
Dollars
 
%
 
(in ‘000 USD)
  
2022
   
2021
   
$
   
%
 
Depreciation and amortization
  $12,440   $13,176    (736)   (6)%  $37,947   $38,884    (937)   (2)%   $13,196   $13,114   $82    1% 
There were no significant changes in depreciation and amortization expense for the three and nine months ended September 30, 2021,March 31, 2022, compared to the three and nine months ended September 30, 2020.same period in fiscal 2021.
Other income (expense)(income) expense
 
   
For three months ended
  
For nine months ended
 
   
September 30,
  
Change
  
September 30,
  
Change
 
(in ‘000)
  
2021
  
2020
  
Dollars
  
%
  
2021
  
2020
  
Dollars
   
%
 
Interest expense including amortization of deferred financing costs, net
  $(5,589)  $(5,276)   (313)   6%  $(16,155)  $(18,359)   2,204    (12)% 
Change in fair value of warrant liability
   2,898   (651)   3,549   (545)%   5,281   (3,482)   8,763    (252)% 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
Total other income (expense)
  
$
(2,691
) 
 
$
(5,927
) 
 
 
3,236
 
 
 
(55
)% 
 
$
(10,874
) 
 
$
(21,841
) 
 
 
10,967
 
  
 
(50
)% 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
   
Three months ended March 31,
   
Change
 
(in ‘000 USD)
  
2022
   
2021
   
$
   
%
 
Interest expense, including amortization of deferred financing costs, net
  $6,624   $5,059   $1,565    31% 
Change in fair value of warrant liability
   (27)    (2,424)    2,397    (99)% 
  
 
 
   
 
 
   
 
 
   
Total other expense
  
$
6,597
 
  
$
2,635
 
  
$
3,962
 
  
 
150
% 
  
 
 
   
 
 
   
 
 
   
The decreaseincrease in other income (expense)expense for the three months ended September 30, 2021, compared toMarch 31, 2022 versus the three months ended September 30, 2020,March 31, 2021, was primarily due to a $3.5$2.4 million decrease in the expense related toother income from the change in fair value of our warrant liability.
The decrease in other expense for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, was primarily due toliability and a decrease$1.5 million increase in our interest expense which was a result of a reduction in London InterBank Offered Rates (“LIBOR rates”) compareddue to the prior period (KORE’s term loans are indexed to LIBOR) plus a $8.8 million decrease inaddition of the expense related to the change in fair value of our warrant liability.Notes.
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Table of Contents
Income taxes
 
  
For three months ended
 
For nine months ended
   
Three months ended March 31,
   
Change
 
  
September 30,
 
Change
 
September 30,
 
Change
 
(in ‘000)
  
2021
 
2020
 
Dollars
 
%
 
2021
 
2020
 
Dollars
 
%
 
(in ‘000 USD)
  
2022
   
2021
   
$
   
%
 
Income tax benefit
  $(3,710)  $(1,518)   (2,192)   144%  $(7,628)  $(5,376)   (2,252)   42%   $(2,545)   $(1,264)   $(1,281)    101% 
For the three months ended March 31, 2022, and March 31, 2021, we recognized an income tax benefit of $2.5 million and $1.2 million, respectively, in the consolidated statements of operations.
The change to the income tax benefitprovision for the three months ended September 30, 2021 compared to the income tax benefit forMarch 31, 2022, versus the three months ended September 30, 2020March 31, 2021, was primarily due to changes in the jurisdictional mix of earnings period over period.
Theand the impact of the change to the income tax benefit for the nine months ended September 30, 2021 compared to the income tax benefit for the nine months ended September 30, 2020 was primarily due to changes in the jurisdictional mixfair value of earnings period over period.warrant liability which is not taxable.
Liquidity and Capital Resources
Overview
Our liquidity requirements arise from our working capital needs, our obligations to make scheduled payments of interest on our indebtedness and our need to fund capital expenditures to support our current operations and to facilitate growth and expansion. We have financed our operations and expansion with a combination of debt and equity.
At September 30, 2021,March 31, 2022, we had total equity of $284.0$275.1 million, net of an accumulated deficit of $(126.2)$(148.8) million. Our primary sources of liquidity consist of cash and cash equivalents totaling $72.7$31.9 million and a Revolving Credit Facility of $30.0$30 million of which the full $30.0$30 million was available for use for working capital and general business purposes. We believe this will be sufficient to provide working capital, make interest payments and make capital expenditures to support operations and facilitate growth and expansion for the next twelve months.
Our ability to pay dividends on our common stock is limited by restrictions under the terms of agreements governing our indebtedness. Subject to the full terms and conditions under the agreements governing our indebtedness, we may be permitted to make dividends and distributions under such agreements if there is no event of default and
certain
pro-forma financial
financial ratios (as defined by such agreements) are met.
In July 2017, the United Kingdom’s Financial Conduct Authority announced that it would no longer require banks to submit rates for the LIBOR after 2021. In November 2020, the ICE Benchmark Administration (“IBA”)(IBA), LIBOR’s administrator, proposed extending the publication of USD LIBOR through June 2023. Subsequently, in March of 2021, IBA stated it will cease publication of certain LIBOR rates after December 31, 2021. USD LIBOR rates that do not cease on December 31, 2021 will continue to be published through June 30, 2023. The Company has reviewed its debt facilities and continues to evaluate commercial contracts that may utilize LIBOR as the reference rate. The Company will continue its assessment and monitor regulatory developments during the transition period.
Cash flows from operating activities
For the nine months ended September 30 2021 and 2020, operating activities used $9.4 million and provided $18.7 million of cash, respectively. The decrease in cash used by operating activities was primarily impacted by increases in accounts receivable, prepaid expenses and other receivables, and inventories of $12.5 million, $5.1 million, and $6.5 million, respectively, as a result of Integron contributing an increase of $18.2 million in revenue during the nine months ended September 30, 2021 as compared to the same period in the prior year.
39
Table of Contents
Cash Flows
The following table presents our summarized cash flow data:
   
For the three months ended
     
   
March 31,
     
(in ‘000 USD)
  
2022
   
2021
   
$ Change
 
Cash flows from operating activities
      
Net loss
  $(10,907)   $(1,081)    (9,826) 
Net cash used in operating activities
   (3,980)    (12,320)    8,340 
Net cash used in investing activities
   (48,503)    (3,091)    (45,412) 
Net cash provided by/(used in) financing activities
   (1,550)    18,291    (19,841) 
Effect of Exchange Rate Change on Cash and Cash Equivalents
   (26)    (67)    41 
Change in Cash and Cash Equivalents and Restricted Cash
   (54,059)    2,813    (56,872) 
Cash and Cash Equivalents and Restricted Cash, beginning of period
   86,343    10,693    75,650 
Cash and Cash Equivalents and Restricted Cash, end of period
  $32,284   $13,506    18,778 
Cash flows from operating activities
Net cash used in operating activities decreased $8.3 million during the three months ended March 31, 2022, compared to the similar period in 2021, primarily due to changes in working capital driven by impacts from decreased inventory and prepaid levels, as well as a smaller reduction in accounts payable and accrued liabilities due to timing of payments. This decrease was offset by increases in accounts receivable and an increase in our net loss. Our net loss increased primarily due to costs of being a public company, as well as one-time costs related to the BMP Acquisition, as well as non-cash expenses including stock-based compensation and higher deferred income taxes.
Cash flows from investing activities
Cash used in our investing activities infor the ninethree months ended September 30,March 31, 2022 was $48.5 million resulting primarily from $45.1 million for the BMP Acquisition and $2.8 million of capital expenditures during the period related to technology equipment, software licenses, and internally developed software.
Cash used in our investing activities for the three months ended March 31, 2021 and 2020 was $9.8$3.1 million, and $9.3 million, respectively, resulting primarily from capital expenditures during the period related to technology equipment, software licenses, and internally developed software.
Cash flows from financing activities
Cash provided in our financing activities in the nine months ended September 30, 2021 was $81.8 million, primarily from net proceeds from long-term debt of $82.6 million and net proceeds from the issuance of common stock of $223.0 million, offset by the settlement of preferred stock of $229.9 million, repayment of long-term debt of $2.4 million, repayment of related party note of $1.5 million, and payment of capital lease obligations of $0.8 million.
Cash used in our financing activities in the ninethree months ended September 30, 2020March 31, 2022, was $6.1$1.6 million, which resulted primarily from $0.8 million of term loan principal payments and to a lesser extent $0.6 million of deferred financing costs and equity financing fees resulting from our business combination.
Cash provided by our financing activities in the three months ended March 31, 2021 was $18.3 million, primarily due to draw of our revolving credit facility of $21.7$20.0 million, offset partially by $0.8 million of term loan principal payments of $2.4 million, revolving credit facility repayments of $25.0 million, $0.1 million capital lease repayment and repurchase of common stock of $0.2 million.payments.
Future Liquidity and Capital Resource Requirements
We believe that our existing cash and cash equivalents along with expected cash flows from operating activities and additional funds available under our Revolving Credit Facility, will be sufficient over the next 12 months to provide working capital, cover interest payments on our debt facilities and fund growth initiatives, and capital expenditures.
As of September 30, 2021,March 31, 2022, the Company has a total of $16.2$21.5 million of supplier and carrier-related purchase and lease commitments and a totalfor the remainder of $0.8the 2022 fiscal year. Additionally, as of March 31, 2022, the Company has $2.4 million of scheduled debt principal payments relating to the UBS term loan with UBS for the remainder of the year ended December 31, 2021.2022 fiscal year.
Additionally,As of March 31, 2022, the Company has a total of $17.1$35.9 million of supplier and carrier-related purchase & lease commitments for the fiscal years ended December 31, 2022 through 2025.2026. We also have scheduled debtprincipal payments relating to the UBS term loan with UBS of $3.2 million for each of the fiscal years ended December 31, 2022 through 2024, with all outstanding principal due on December 24, 2024. Further, the Company has semi-annual interest payments due on $120 million related to the Backstop Notes. All outstanding principal on the Backstop Notes is due in full in 2028.
From 20212022 to 2025, KORE expects2026, we expect to fund supplier and carrier-related purchase & lease commitments - all(all of which are costs of operating the business -business) entirely from cash inflows from itsour customers. We currently expect that the excess cash flows after paying the abovementioned contractual commitments, as well as other costs of business, such as payroll, costs incurred on suppliers and carrier spend (which is not currently committed contractually in addition to the committed spend), interest and taxes - taxes—will be sufficient to meet outstanding debt principal payments from 20212022 to 2023.
The outstanding principal on our term loan is dependent on the future growth of KORE’s business. The working capital needed to fund such growth net of the abovementioned excess of customer inflows with respect to the outflows from the abovementioned expenses of the business may or may not be sufficient to pay off the final balloon payment on the outstanding principle on December 24, 2024. In the event the outstanding principal is not fully paid off by December 24, 2024, when the balloon payment is due, KORE expects to refinance this debt. KORE may consider refinancing the debt well in advance of December 24, 2024 and may do so to take advantage of favorable credit markets, to reduce interest rates and to extend the maturity.
 
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Notably,Our available cash and cash equivalents, together with our results of operations, are expected to be sufficient to meet our operating expenses, debt service payments, capital requirements and other obligations for at least the next 12 months. However, to increase available liquidity or to fund acquisitions or other strategic activities, we may seek additional financing. We have no commitments for any additional financing and have no lines of credit or similar sources of financing, other than the borrowings available under the Credit Facilities, and the Bank Overdraft Facility. We cannot be sure that we can obtain additional financing on favorable terms, if at all, through the issuance of equity securities or the incurrence of additional debt. Additional equity financing may dilute our stockholders, and debt financing, if available, may restrict our ability to repurchase common stock or debt, declare and pay dividends, raise future capital and make acquisitions. If we are unable to obtain additional needed financing, it may be neededprohibit us from refinancing existing indebtedness and making acquisitions, capital expenditures and/or investments, which could materially and adversely affect our business. We may need additional capital to fund future Mergersmergers & Acquisitions.acquisitions.
Key activities during the ninethree months ended September 30,March 31, 2022, and 2021 and 2020 are as follows:
 
TheDuring the three months ended March 31, 2022, our revenue increased by 25% or $13.6 million due to organic and inorganic revenue growth as compared to same period in fiscal 2021.
On February 16, 2022, the Company closed theacquired Business Combination on September 30, 2021, resulting in a net increase inMobility Partners, Inc. and Simon IoT, for cash consideration of $63.2$45.1 million and a recapitalizationthe issuance of the Company’s equity structure.4,212,246 shares of KORE’s common stock valued at $23.3 million.
 
The Company used $9.4 million and provided $18.7 million ofCompany’s cash flows fromused in operating activities were $4.0 and $12.3 million, for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively.
 
The Company’s investment activity used $9.8$48.5 million and $9.3$3.1 million for three months ended March 31, 2022 and 2021, respectively. The increase year over year resulted primarily from $45.1 million for the nine months ended September 30, 2021BMP Acquisition and 2020, respectively, resulting primarily fromto a lesser extent $2.8 million of capital expenditures during the period related to technology equipment, software licenses, and internally developed software.
 
TheDuring the three months ended March 31, 2022, the Company did not utilize our revolving credit facility. During the three months ended March 31, 2021, the Company drew $25.0 and $21.7$20.0 million on and repaid $25.0 and $25.0 million of itsour revolving line of credit during the nine months ended September 30, 2021 and 2020, respectively.facility.
Non-GAAP
Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following
non-GAAP
measures are useful in evaluating our operational performance. We use the following
non-GAAP
financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that
non-GAAP
financial information, when taken collectively, may be helpful to investors in assessing our operating performance.
Non-GAAP
financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from similarly-titled
non-GAAP
measures used by other companies.
EBITDA and Adjusted EBITDA
“EBITDA” is defined as net income (loss) before other
non-operating
interest expense or interest income, income tax expense or benefit, and depreciation and amortization. “Adjusted EBITDA” is defined as EBITDA adjusted for unusual and other significant items that management views as distorting the operating results from period to period. Such adjustments may include stock-based compensation, integration and acquisition-related charges, tangible and intangible asset impairment charges, certain contingent liability reversals, transformation, and foreign currency transaction gains and losses. EBITDA and Adjusted EBITDA are intended as supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP. We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with those of comparable companies, which may present similar
non-GAAP
financial measures to investors. However, you should be aware that when evaluating EBITDA and Adjusted EBITDA we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or
non-recurring
items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion.
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA on a supplemental basis. You should review the reconciliation of net loss to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.
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The following table reconciles net loss to EBITDA and Adjusted EBITDA for the periods shown:
 
(in ‘000)
        
  
For the three months
ended
September 30,
   
For the nine months
ended
September 30,
 
  
2021
   
2020
   
2021
   
2020
   
For the three Months Ended March 31,
 
(in ‘000 USD)
  
2022
   
2021
 
Net loss
  $(4,508)    (5,648)   $(12,474)   $(19,474)   
$
(10,907
) 
  
$
 (1,081)
 
Income tax expense (benefit)
   (3,710)    (1,518)    (7,628)    (5,376) 
Income tax benefit
   (2,545)    (1,264) 
Interest expense
   5,589    5,276    16,155    18,359    6,624    5,059 
Depreciation and amortization
   12,440    13,176    37,947    38,884    13,196    13,114 
  
 
   
 
   
 
   
 
   
 
   
 
 
EBITDA
  
 
9,811
 
  
 
11,286
 
  
 
34,000
 
  
 
32,393
 
   6,368    15,828 
  
 
   
 
   
 
   
 
   
 
   
 
 
Change in fair value of warrant liabilities
(non-cash)
   (2,898)    651    (5,281)    3,482 
Transformation expense
   2,424    1,608    6,174    5,448 
Change in Fair value of warrant liabilities
(non-cash)
   (27)    (2,424) 
Transformation expenses
   1,565    1,803 
Acquisition and integration-related restructuring costs
   2,772    1,002    7,290    3,399    5,293    851 
Stock-based compensation
(non-cash)
   3,933    315    4,564    846    2,050    315 
Foreign currency loss (gain)
(non-cash)
   (240)    328    (163)    (1,356) 
Foreign currency loss
(non-cash)
   (3)    (70) 
Other
   94    179    390    289    395    115 
  
 
   
 
   
 
   
 
   
 
   
 
 
Adjusted EBITDA
  
 
15,896
 
  
 
15,369
 
  
$
46,974
 
  
$
44,501
 
  
$
15,641
 
  
$
16,418
 
  
 
   
 
   
 
   
 
   
 
   
 
 
Transformational
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Transformation expenses are related to the implementation of our strategic transformation plan, which include the costs of
a
re-write
of our core technology platform, expenses incurred to design certain new IoT solutions andSolutions
“go-to-market”and “go-to-market”
capabilities.
Acquisition and integration-related restructuring costs for the three and nine months ended September 30,March 31, 2022 relate to legal, accounting, advisory, and other professional services costs associated with the BMP Acquisition as well as the costs related to the Business Combination. Acquisition and integration-related restructuring costs for the three months ended March 31, 2021 and 2020 relate to legal, accounting, advisory, and other professional services costs associated with the Integron Acquisition and Integron’s integration into KORE, certain synergies related to our acquisitions,
certain
one-time
severance costs associated with our transformation, and accounting and advisory fees related to the Business Combination. The Business Combination is the primary driver of the increase in acquisition and integration-related restructuring costs period over period.
Concentration of Credit Risk and
Off-Balance
Sheet Arrangements
Cash and cash equivalents are financial instruments that are potentially subject to concentrations of credit risk. The Company’s cash and cash equivalents are deposited in accounts at large financial institutions, and amounts may exceed federally insured limits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash and cash equivalents are held.
The Company has a total of $34.6$35.9 million of purchase and lease commitments payable that are not recorded as liabilities on the balance sheet as of September 30, 2021.March 31, 2022. Additionally, the Company has a $0.4 million standby letter of credit and bank guarantees as of September 30, 2021.March 31, 2022. The Company has no other financial instruments or commitments
with
off-balance-sheet
risk of loss.
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Critical Accounting Policies and Estimates
Our discussion and analysis of our results of operations, liquidity and capital resources are based on ourcondensed consolidated financial statements which have beenare prepared in conformityaccordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and liabilitiesexpenses, and the disclosure of contingent assetsrelated disclosures. On an ongoing basis, we evaluate our estimates and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates areassumptions based on our historical experience and on various other factorsassumptions that we believe are reasonable under the circumstances, thecircumstances. Our actual results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
Actual results maycould differ from these estimates under different assumptions or conditions. We believe thatRefer to “Critical Accounting Policies and Estimates” contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 for a complete discussion of our critical accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
While There have been no material changes to our significantcritical accounting policies are described in the notes to our consolidated financial statements, we believe that the following accounting policies are most critical to understanding our financial condition and historical and future results of operations:
Revenue Recognition
We derive revenue primarily from IoT Connectivity and IoT Solutions. IoT Connectivity arrangements provide customers with secure and reliable wireless connectivity to mobile and fixed devices through various mobile network carriers. Revenue from IoT Connectivity consists of monthly recurring charges (“MRC’s”) and overage/usage charges, and contracts are generally short-term in nature (
i.e.
,
month-to-month
arrangements). Customers generally may cancel with 30 days’ notice without substantive cost or fees. Revenue for MRC’s and overage/usage charges are recognized over time as the Company satisfies the performance obligation (generally starting when an enrolled device is activated on the Company’s platform). MRC’s are billed monthly in advance (generally in the last week of a month); any amounts billed for which the service has not been provided as of the balance sheet dates are reported as a contract liability and components of deferred revenue. Overage/usage charges are billed in arrears on a monthly cycle. Overage/usage charges are evaluated on a monthly basis, and any overage/usage charges determined by management as unlikely to be collected due to a customer disputing the charge or due to a concession are reserved. Reserved items are written off when deemed uncollectible or recognized as revenue if collected. Certain IoT Connectivity customers also have the option to purchase products and/or equipment (
e.g.
, subscriber identification module or “SIM” cards, routers, phones, or tablets) from us on an as needed basis. Product sales to IoT Connectivity customers are recognized when control is transferred to the customer, which is typically upon shipment of the product.
IoT Solutions arrangements includes device solutions (including connectivity), deployment services, and/or technology-related professional services. We evaluate each IoT Solutions arrangement to determine the contract for accounting purposes. If a contract contains more than one performance obligation, we allocate consideration to each performance obligation based on the standalone selling prices of each performance obligation. Standalone selling prices are based on analyses performed by management based on readily observable prices or utilizing a cost-plus-margin approach if prices are not observable. Hardware, deployment services, and connectivity services generally have readily observable prices. The standalone selling price of our warehouse management services (which is associated with our
bill-and-hold
inventory and determined to be immaterial as discussed below) was determined using a cost-plus-margin approach with the primary assumptions including Company profit objectives, internal cost structure, and current market trends. Device and other hardware sales in IoT Solutions arrangements are generally accounted for as separate contracts since the customer is not obligated to purchase additional services when committing to the purchase of any products. Such sales are typically recognized upon shipment to the customer. However, in certain contracts, the customer has requested us to hold the products ordered for later shipment to the customer’s remote location or to the customer’s end user as a part of a vendor managed inventory model. In these situations, we have concluded that transfer of control to the customer occurs prior to shipment. In these
“bill-and-hold”
arrangements, the right to invoice, transfer of legal title and transfer of the risk and rewards associated with the products occurs when we receive the hardware from a third party vendor and have deemed it to be functional. Additionally, the products are identified both physically and systematically as belonging to a specific customer, are usable by the customer, and are only shipped, used, or disposed as directed by the specific customer. Based on these factors, we recognize revenue on
bill-and-hold
hardware when the hardware is received by us and deemed functional.
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Deployment services consist of us preparing hardware owned by a customer for use by a customer’s end user. Deployment and connectivity may both be included within a single IoT Solutions contract and are considered separate performance obligations. While consideration for deployment services is generally fixed when ordered by the client, consideration for connectivity services is variable and solely related to the connectivity services. Therefore, the fixed consideration is allocated to the deployment services and is recognized as revenue when the services are provided (
i.e.
, when the related hardware is shipped to the customer). Connectivity within IoT Solutions contracts are recognized similar to the IoT Connectivity as described above, since such contracts are generally short term in nature and variability is resolved each month as the services are provided.
Professional services are generally provided over a contract term of one to two months. Revenue is recognized over time on an input method basis (typically, based on hours completed to date and an estimate of total hours to complete the project).
Accounting for business combinations
We account for acquired businesses using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recorded at their respective fair values on the date of acquisition. We assign fair value of the consideration paid to the underlying net assets of the acquired business based on their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded to goodwill. Intangible assets are amortized over the expected life of the asset. We recognize acquisition-related expenses and restructuring costs separately from the business combination and expense as incurred. All changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period are recognized as a component of provision for income taxes. We make significant assumptions and estimates in determiningsince our Annual Report on Form 10-K for the preliminary estimated purchase price and the preliminary allocation of the estimated purchase in the consolidated financial statements. These preliminary estimates and assumptions are subject to change as we finalize the valuations. The final valuations may change significantly from the preliminary estimates. Fair value determinations and useful life estimates are based on, among other factors, estimates of expected future cash flows from revenue of the intangible assets acquired, estimates of appropriate discount rates used to calculate the present value of expected future cash flows, estimated useful lives of the intangible assets acquired, customer attrition rates, future changes in technology and brand awareness, and other factors. Although we believe the assumptions and estimates we have made have been reasonable and appropriate, they are based, in part, on historical experience, information obtained from the management of the acquired companies and future expectations. For these and other reasons, actual results may vary significantly from estimated results. During the preliminary purchase price measurement period, which may be up to one year from the business combination date, we will record adjustments to the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date, with a corresponding offset to goodwill. After the preliminary purchase price measurement period, we will record adjustments to assets acquired or liabilities assumed subsequent to the purchase price measurement period in our operating results in the period in which the adjustments were determined.ended December 31, 2021.
 
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Internal Use Software
Certain costs of platform and software applications developed for internal use are capitalized as intangible assets. Capitalization of costs begins when two criteria are met: (i) the preliminary project stage is completed (
i.e.
, application development stage) and (ii) it is probable that the software will be completed and used for its intended function. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Costs incurred for maintenance, minor upgrades and enhancements are recorded under selling, general and administrative expense in the consolidated statement of operations as incurred. Costs related to preliminary project activities and postimplementation operating activities are also recorded under selling, general and administrative expense in the consolidated statement of operations as incurred. The Company amortizes the capitalized costs on a straight-line basis over the useful life of the asset. The average useful life for capitalized internal use computer software is between
3-5
years. Capitalized internal use computer software, net of accumulated amortization, was $24.5 million, and $23.2 million as of September 30, 2021, and December 31, 2020, respectively, and was included in intangible assets.
Intangible Assets
Identifiable intangible assets acquired individually or as part of a group of other assets are initially recognized and measured at cost. The cost of a group of intangible assets acquired in a transaction, including those acquired in a business combination that meet the specified criteria for recognition apart from goodwill, is the sum of the individual assets acquired based on their acquisition date fair values. The cost incurred to enhance the service potential of an intangible asset is capitalized as a betterment.
Identifiable intangible assets comprise assets that have a definite life. Customer relationship intangibles are recognized on an accelerated basis and the other intangible assets are amortized on a straight-line basis over their estimated useful lives as follows:
Customer relationships
10-13 years
Technology
5-9
years
Carrier contracts
10 years
Trademarks
9-10
years
Non-compete
agreements
3 years
Internally developed and acquired computer software
3-5
years
As of September 30, 2021 and December 31, 2020, the Company determined that there were no indicators of impairment and did not recognize any impairment of its intangible assets.
Goodwill
Goodwill is not amortized but tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is tested for impairment at the reporting unit level, which is defined as an operating segment, or one level below the operating segment. We operate in one operating segment, which is our only reporting unit.
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We test for an indication of goodwill impairment on December 31st of each year or when indicators of impairment exist. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. We perform a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value of the reporting units is less than its carrying amount. Qualitative factors that we consider include macroeconomics conditions such as geographical location and fluctuations in foreign exchange, industry and market conditions, financial performance, a significant adverse change in legal factors or in the business climate, unanticipated competition, entity-specific events and share price trends. If, based on the evaluation, we determine that the fair value of the reporting unit is less than the carrying value, then an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. Under a quantitative test, we obtain a third-party valuation of the fair value of the reporting unit. Assumptions we use in the fair value calculation include revenue growth and profitability, terminal values, discount rates, and implied control premium. Impairments, if any, are recorded to the statement of operations in the period the impairment is recognized. As of September 30, 2021 and December 31, 2020, the Company determined there were no indicators of impairment and did not recognize any impairment of its goodwill.
Income taxes
We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using enacted rates. The effect of a change in tax rates on deferred taxes is recognized in income in the period that includes the enactment date.
We recognize the financial statement effect of an uncertain income tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. Recognized income tax positions are measured at the largest amount that is greater than 50% likely to be realized. A valuation allowance is recorded to reduce deferred income tax assets to an amount, which in the opinion of management is more likely than not to be realized.
Management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our deferred tax assets. We consider factors such as the cumulative income or loss in recent years; reversal of deferred tax liabilities; projected future taxable income exclusive of temporary differences; the character of the income tax asset, including income tax positions; tax planning strategies and the period over which we expect the deferred tax assets to be recovered in the determination of the valuation allowance. In the event that actual results differ from these estimates or we adjust our estimates in the future, we may need to adjust our valuation allowance, which could materially impact our financial position and results of operations.
Stock based compensation
Our share-based compensation plans consist of the 2014 Equity Incentive Plan (the “Plan”), under which the board is authorized to grant stock options to eligible employees, and directors of the Company. See “Note 10—
Share-Based Payment and Related Stock Option Plan
”, in our accompanying unaudited condensed consolidated financial statements for information on the Plan and related stock options.
We use the Black-Scholes valuation model to estimate the fair value of each option award on the date of grant, which uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. We expense the fair value of the option awards on a straight-line basis over the requisite service period and have elected to account for forfeitures as they occur.
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Recent accounting pronouncements
As an emerging growth company (“EGC”), the JOBS Act allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time the Company is no longer considered to be an EGC.
See Note“Note 2 - Summary of Significant Accounting policies - Recently Adopted Accounting Pronouncements” to the accompanying unaudited condensed consolidated financial statements for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and our results of operations.
 
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Item 3.
Quantitative and Qualitative Disclosures About Market Risk
QuantitativeThere have been no material changes to the Company’s market risk during the first three months of 2022. For a discussion of the Company’s exposure to market risk, refer to the Company’s market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk
We are exposed to certain market risks in the ordinary course of business, including sensitivities as follows:
Interest Rate Risk
As of September 30, 2021, and December 31, 2020, we had cash and cash equivalents of $72.7 million, and $10.3 million, respectively, and restricted cash of $0.4 million, and $0.4 million. Cash and cash equivalents consist of highly liquid instruments with an original maturity of less than 90 days or the ability to redeem amounts on demand. Restricted cash consist primarily of cash deposits held with financial institutions for letters of credit and is not available for general corporate purposes. The cash and cash equivalents are held for working capital purposes. Due to the short-term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. We estimate a 100 basis- point change in interest rates during anyRisk” of the periods presented would not have had a material impact on our interest revenue on an annualized basis.
We are subject to risk from fluctuations in the interest rates related to our long-term debt. The interest rates are based upon the applicable LIBOR rate plus an applicable margin for such loans or the lender’s base rate plus an applicable margin for such loans. Based on September 30, 2021 estimated LIBOR rates, we estimate a 100 basis-point change in the LIBOR rate would have a $3.9 million impact on our interest expense on an annualized basis.
Exchange Rate Risk
Our reporting currency is the U.S. dollar, although we transact business in various foreign locations and currencies. The functional currency of the Company’s foreign subsidiaries is generally the local currency. As a result, their reported financial results could be significantly affected by changes in foreign currency exchange rates upon translation to U.S. dollars. When the U.S. dollar strengthens against other currencies, the translated value of the foreign functional currency income and expense amounts results in lower net income (or lower net loss). When the U.S. dollar weakens, the translated value of the foreign functional currency income and expense amounts results in higher net income (or higher net loss). Our reported results are therefore adversely affected by a stronger U.S. dollar relative to major currencies worldwide when foreign operations are net profitable.
During the nine months ended September 30, 2021 and 2020, we recognized average net loss of $11.9 million per nine month period from operations located outside the U.S., virtually all of which was originally accounted for in currencies other than the U.S. dollar. Upon translation into U.S. dollars, such reported net income would have increased or decreased, assuming a hypothetical 10% change in weighted-average foreign currency exchange rates against the U.S. dollar, by approximately $1.2 million.
Form 10-K.
 
Item 4.
Controls and Procedures
Limitations on effectivenessEvaluation of disclosure controls and procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, our principal executive officer and principal accounting and financial officer, respectively, have evaluated, as of the end of the period covered by this Quarterly Report on Form
10-Q,
the effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e)
and
15d-15(e)
under the Exchange Act) as of September 30, 2021.March 31, 2022.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.regulations. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2021March 31, 2022, due to the material weaknesses in our internal control over financial reporting described below. In light of this fact, our management has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding the material weaknesses in our internal control over financial reporting, the consolidated financial statements for the periods covered by and included in this Quarterly Report on Form
10-Q
fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.
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Material Weaknesses
in Internal Control over Financial Reporting
As disclosed in the section titled “Risk Factors”“Controls and Procedures” in Part II, Item 1A9A of this Quarterlyour Annual Report on Form 10-Q,
10-K,
we identified material weaknesses in our internal control over financial reporting. Specifically, weManagement noted that the Company continues to have material weaknesses in its internal control over financial reporting as follows:
Entity-Level Controls -
Management did not maintain appropriately designed entity-level controls impacting the (1) control environment, (2) risk assessment procedures, including those related to fraud, and (3) monitoring activities to prevent or detect material misstatements to the financial statements and assess whether the components of internal control were present and functioning. These deficiencies were primarily attributed to an insufficient number of qualified personnel and resources, improper segregation of duties, and lack of formalized policies, procedures, and related controls to support and provide proper oversight and accountability over the performance of controls.
Financial Close Process -
Management did not design and maintain formally documentedeffective control activities over certain routine aspects of financial reporting. Specifically, management did not design and maintain effective controls and accounting policies and procedures. These include information technology general controls,over (i) the period-end financial reporting process, including management review controls over key disclosures and financial statement support schedules, (ii) the monthly financial close process, including the review of journal entries, account reconciliations, and analysis of recorded balances, and (iii) the completeness and accuracy of information used by control owners in the operation of certain controls.
Non-routine
and Complex Transactions -
Management did not design and maintain effective control activities over certain non-routine and/or complex aspects of financial reporting. Specifically, management did not design and maintain effective (i) controls over the identification, accounting, and review of
non-routine
and complex transactions, and (ii) management review controls over complex areas of accounting such as revenue, income taxes, and complex financial instruments, at an appropriate level of precision to detect a material misstatement and sufficient appropriate evidence was not maintained to support the execution and evaluation of the controls performed, including the review of the completeness and accuracy of the source data utilized and the appropriateness of assumptions used by the control owner.
Procure to pay –
Management did not design and maintain effective controls over the procure to pay cycle. Specifically, management did not implement requirements over the approval of purchase orders and subsequent general ledger account coding to ensure payments are properly and timely approved, paid and recorded in the general ledger.
Information Technology General Controls
– Management did not design and maintain effective general controls over information systems that support the financial reporting process. Specifically, management did not design and maintain effective (i) program change management and program development controls for financial systems, including master databases, relevant to our financial reporting, (ii) logical user access controls to ensure appropriate segregation of duties over the review and approvaladequate restrictions of account reconciliationsusers, including those with privileged access, and manual journal entries. These material weaknesses could result in a misstatement of account balances or disclosures that would result in a material misstatement(iii) controls related to the annual or interim financial statements that would not be prevented or detected. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected by our internal controls on a timely basis.critical data interfaces, data backups, and restorations.
Remediation Plan
To addressWe have begun the process of, and we are focused on, designing and implementing effective internal control measures to improve our internal control over financial reporting and remediate the material weaknesses, weweaknesses. Our internal control remediation efforts include the following:
We hired additional qualified accounting resources and outside resources to segregate key functions within our financial and information technology processes supporting our internal controls over financial reporting and to provide appropriate oversight and accountability over the performance of our internal controls.
We are in the process of: evaluating, testing,of reassessing and remediating (as necessary) KORE’s internalformalizing the design of certain accounting and information technology policies relating to security and change management controls.
We engaged an outside firm to assist management with (i) reviewing our current processes, procedures, and systems and assessing the design of controls to identify opportunities to enhance the design of controls that would address relevant risks identified by management, and (ii) enhancing and implementing protocols to retain sufficient documentary evidence to support the operating effectiveness of such controls.
We plan to implement an application solution to enhance controls over inventory management and reporting.
In addition to implementing and refining the above activities, we expect to engage in additional remediation activities in fiscal year 2022, including:
Continuing to enhance and formalize our accounting, business operations, and information technology policies, procedures, and controls to achieve complete, accurate, and timely financial accounting, reporting and disclosures.
Continuing to hire additional qualified accounting resources and utilize outside resources, where necessary.
Completing the implementation of new financial processing systems to replace legacy systems and establish effective general controls over these systems to ensure that our automated process level controls and information produced and maintained in our IT systems is relevant and reliable.
Designing and implementing controls that address the completeness and accuracy of underlying data used in the performance of controls over accounting transactions and disclosures.
Developing monitoring controls and protocols that will allow us to timely assess the design and the operating effectiveness of controls over financial reporting; developing a teamreporting and make necessary changes to the design of financial accountingcontrols, if any.
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Reviewing the existing procure to pay cycle and reporting professionals sufficientimplementing design enhancements to meetmake the requirements of a public company;process more efficient and consolidating finance, accounting, and reporting operations into a common set of comprehensive accounting and financial reporting procedures and controls; developed and are implementing a roadmap to migrate from multiple billing platforms to a single existing platform and have initiated other projects to streamline the financial processes for acquired entities while meeting the business needs of the Company.effective.
While we believe that these efforts will improve our internal control over entity level controls, financial reporting including inventory, procure to pay process and ITGC’s, the design and implementation of our remediation is ongoing and will require validation and testing of the design and operating effectiveness of our internal controls over a sustained period of financial reporting cycles. The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight.review. We will not be able to conclude whether the steps we are taking will fully remediate the material weakness in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness.
Changes in Internal Control Over Financial ReportingLimitations on effectiveness of controls and procedures
The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.
Changes in internal control over financial reporting
As part of our remediation plan discussed above, we continued formalizing documentation of policies and procedures and evaluating the implementation of new and existing controls during the quarter ended September 30, 2021.March 31, 2022. Such remediation actions were changes in our internal control over financial reporting identified in connection with the evaluation required by Rule
13a-15(d)
and
15d-15(d)
of the Exchange Act that occurred during the three months ended September 30, 2021March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
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PART II – II—OTHER INFORMATION
 
Item 1.
Legal Proceedings.
From time to time, we may bethe Company is involved in litigation relating to claims arising out of our operations in the ordinary course of our business. There are no material legal proceedings, other than ordinary routine litigation incidental to the business, to which wethe Company or any of ourthe Company’s subsidiaries are a party or of which any of ourthe Company or ourthe Company’s subsidiaries’ property is subject as of the filing date of this Quarterly Report on Form
10-Q.
subject.
 
Item 1A.
Risk Factors.
As of the date of this Quarterly Report, there have been no material changes to those risk factors previously disclosed in our QuarterlyAnnual Report on Form
10-Q10-K
for the period ending June 30, 2021, except for the update of the risk factor set forth below.December 31, 2021. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. The risk factors detailed in the section titled “Risk Factors” beginning on page 36 of the Proxy Statement are incorporated herein by reference. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
KORE has identified material weaknesses in its internal control over financial reporting. If remediation of such material weaknesses is not effective, or if it fails to develop and maintain proper and effective internal control over financial reporting, KORE’s ability to produce timely and accurate financial statements, comply with applicable laws and regulations, or access the capital markets could be impaired.
As a public company, KORE is actively evaluating its internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404(a) of the Sarbanes-Oxley Act, or Section 404. The process of designing and implementing effective internal control over financial reporting is a continuous effort that requires KORE to anticipate and react to changes in its business and the economic and regulatory environments and to expend significant resources to maintain internal control over financial reporting that is adequate to satisfy its reporting obligations as a public company. The rules governing the standards that must be met for its management to assess its internal control over financial reporting are complex and require significant documentation, testing and possible remediation. Testing and maintaining its internal control over financial reporting may divert KORE management’s attention from other matters that are important to its business.
KORE initiated a review of internal controls over financial reporting to determine any challenges for management to report the effectiveness of KORE’s internal control over financial reporting in the upcoming annual report following the completion of the offering. The review identified material weaknesses in its internal control over financial reporting and over information technology (“IT”) general controls for information systems that are relevant to the preparation of its financial statements. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. KORE did not have a sufficient complement of personnel with an appropriate US GAAP accounting and tax knowledge and experience that contributed to the control deficiencies noted below:
We did not design and maintain formal accounting policies, procedures, and controls over significant accounts and disclosures, including segregation of duties, to ensure complete, accurate and timely financial accounting, reporting, and disclosures. In addition, we did not have the formal processes to identify, review and account for nonroutine transactions and/or events, nor to review journal entries, reconcile journal entries to underlying support, or evaluate if journal entries are in compliance with GAAP before the entries are manually posted . Lastly, we did not have a process to ensure all balance sheet accounts had reconciliations that properly supported the balances, including proper review and approvals.
We did not design and maintain effective control over IT general controls for information systems and company-wide End User Computing (“EUCs”) spreadsheets that are relevant to the preparation of its financial statements. Specifically, we did not design and maintain: (i) program change management control for financial systems relevant to our financial reporting to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; (ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate KORE personnel; (iii) computer operations controls to ensure critical data interfaces between systems are appropriately identified and monitored, data backups are authorized and monitored, and restorations are tested; and (iv) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements.
The material weaknesses related to the financial reporting control environment and to the IT control environments have not resulted in material adjustments to accounts and disclosures. However, the deficiencies, when aggregated, could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim condensed consolidated financial statements that would not be prevented or detected.
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To address its material weaknesses, KORE has taken the following steps thus far in 2021 to enhance its internal control over financial reporting and IT general controls and it plans to take additional steps to remediate the material weaknesses:
Hired new leadership in the accounting and finance team, including a Corporate Controller and Tax Senior Manager, with appropriate technical accounting knowledge and public company experience in finance and accounting;
Actively pursuing the hire of a qualified Controller of IoT Solutions, a technical accounting and SEC reporting professionals and additional accounting associates to execute key controls related to various financial reporting processes, in addition to utilizing third-party consultants to supplement KORE’s internal resources focused on technical accounting, application of new accounting standards, tax matters and valuations;
Engaged a global accounting advisory firm to assist with the documentation, evaluation, remediation and testing of KORE’s internal control over financial reporting and ITGC’s, and corrective action has already begun;
Consolidating finance, accounting, and reporting operations, with a common set of comprehensive accounting and financial reporting procedures and controls to improve the completeness and accuracy of financial accounting, reporting and disclosures; and
Developed a roadmap to migrate from multiple legacy billing platforms to a single billing platform by the end of 2022, and also have initiated other projects to improve and streamline the financial operations of our acquired entities.
While KORE is designing and implementing measures to remediate its existing material weaknesses, it cannot predict the success of such measures or the outcome of its assessment of these measures at this time. KORE can give no assurance that these measures will remediate any of the deficiencies in its internal control over financial reporting or that additional material weaknesses in its internal control over financial reporting will not be identified in the future. KORE’s current controls and any new controls that it develops may become inadequate because of changes in conditions in its business, personnel, IT systems and applications, or other factors. Any failure to design or maintain effective internal controls over financial reporting or any difficulties encountered in their implementation or improvement could increase compliance costs, negatively impact share trading prices, or otherwise harm KORE’s operating results or cause loss of investor confidence or delisting and cause the market price of our shares to decline.
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
On October 28, 2021, KORE Wireless Group, Inc. (“Wireless”), aFebruary 16, 2022, the Company and its wholly owned subsidiary of KORE Groupsubsidiaries BMP Simon Holdings, LLC, BMP Merger Sub I, Inc. and BMP Merger Sub II, Inc. (collectively with the Company, the “KORE Parties”) entered into an exchange notes purchase agreement (the “Purchase“BMP Business Combination Agreement”) to acquire Business Mobility Partners, Inc. (“BMP”) and SIMON IoT LLC (“SIMON IoT”). BMP delivers Internet of Things (IoT) enablement services to contract research organizations (CROs) and remote patient monitoring (RPM) customers. SIMON IoT is a leading provider of IoT connectivity services.
Under the terms of the BMP Business Combination Agreement, the aggregate consideration paid at closing by the KORE Parties was $68.3 million consisting of $45.1 million in cash (net of closing cash of $1,995) and amongworking capital adjustments and 4,212,246 shares of KORE common stock having a value of $23.3 million (based upon the Company, Wirelessvolume-weighted average purchase price of KORE common stock for the ten (10) consecutive trading days prior to closing). A portion of the cash purchase price paid at closing is being held in escrow to secure potential indemnification claims. The BMP Business Combination Agreement contains customary piggyback rights with respect to the KORE common stock consideration, subject to certain terms and certain affiliatesconditions set forth therein.
All of Fortress Credit Corp. (“Fortress”) pursuant to which Wireless agreed to sell and Fortress agreed to purchase approximately $25 millionthe shares of Wireless’ 5.50% Exchangeable Senior Notes due 2028 (the “Notes”),KORE common stock issued pursuant to the indenture, dated September 30, 2021,BMP Business Combination Agreement were offered and sold by and amongKORE pursuant to an exemption from the Company, Wireless and Wilimington Trust, national Association,registration requirements of the Securities Act of 1933, as trustee. The Notes are identical in all respects to the the Wireless’ previously issued and outstanding 5.50% Exchangeable Senior Notes due 2028.
Item 3.
Defaults Upon Senior Securities.
None.
Item 4.
Mine Safety Disclosures.
Not applicable.amended, provided by Section 4(a)(2) thereof.
 
Item 5.
Other Information.
On November 15, 2021, the Company entered into a certain Amended and Restated Indenture, by and among the Company, Wireless and Wilmington Trust, National Association, as trustee, governing the Notes issued by Wireless and guaranteed by the Company (the “A&R Indenture”). The A&R Indenture was entered into to cure a defect in the make-whole table. The A&R Indenture is filed as exhibit 10.1 to this Form 10-Q.
Concurrently with the entry into the A&R Indenture, the Company and Wireless entered into amendments to the Backstop Agreement, dated September 30, 2021, by and among Wireless and certain affiliates of Fortress and the Purchase Agreement (together, the “Amendments”). The Amendments were entered into in order to amend the registration rights of Fortress with respect to the Notes and underlying common stock of the Company. The Amendments are filed as exhibits 10.2 and 10.3 to this Form 10-Q.None
 
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Item 6.
Exhibits.
 
Exhibit Number
  
Exhibit Description
10.1  Separation Agreement, dated January 3, 2022, by and among Puneet Pamnani, the Company and KORE Wireless Group Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 7, 2022).
10.1*
10.2BMP Business Combination Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 23, 2022).
10.3Employment Agreement by and between Mr. Jack W. Kennedy Jr. and the Company, dated March 10, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 16, 2022).
10.4  Amended and Restated Indenture,Employment Agreement by and between Mr. Bryan Lubel and the Company, dated NovemberMarch 15, 2021,2022 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 16, 2022).
10.5Amended and Restated Employment Agreement by and between Mr. Tushar K. Sachdev and the Company, dated March 15, 2022 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 16, 2022).
10.6Amended and Restated Employment Agreement by and between Ms. Louise P. Winstone and the Company, dated March 15, 2022 (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on March 16, 2022).
10.7Employment Agreement by and among Paul Holtz, the Company and KORE Wireless Group, Inc. and Wilmington Trust, National Association.Canada, dated April 1, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 6, 2022).
10.2*
  31.1*
  Amendment to Backstop Agreement, dated November 15, 2021, by and among the Company, KORE Wireless Group, Inc. and Drawbridge Special Opportunities Fund LP.
10.3*Amendment to Backstop Agreement, dated November 15, 2021, by and among the Company, KORE Wireless Group, Inc. and the entities set forth on Schedule 1 thereto.
31.1*
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2*
  
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
32.1**
  
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2**
  
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101.INS
  
Inline XBRL Instance Document – Document—the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH
  
Inline XBRL Taxonomy Extension Schema Document
101.CAL
  
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
  
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
  
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
  
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
  
Cover Page Interactive Data File (embedded within the Inline XBRL document)
 
*
Filed herewith.
**
Furnished herewith.
 
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  
KORE Group Holdings, Inc.
Date:
NovemberMay 16, 2021
2022		  By: 
/s/
Romil Bahl
   
Romil Bahl
President and Chief Executive Officer
(Principal Executive Officer)
Date:
NovemberMay 16, 2021
2022		  By: 
/s/
Puneet Pamnani
Paul Holtz
   
Puneet Pamnani
Paul Holtz
Executive Vice President and Chief
Financial Officer and Treasurer
(Principal Financial Officer)